UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[X] Annual Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the fiscal year ended March 31, 1997.
[ ] Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from ____ to _____.
Commission file number 1-11226.
TOMMY HILFIGER CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
BRITISH VIRGIN ISLANDS NOT APPLICABLE
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
6/F, PRECIOUS INDUSTRIAL CENTRE
18 CHEUNG YUE STREET
CHEUNG SHA WAN
KOWLOON, HONG KONG NOT APPLICABLE
(ADDRESS OF PRINCIPAL EXECUTIVE (ZIP CODE)
OFFICES)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE 852-2745-7798
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON
ORDINARY SHARES, $.01 PAR WHICH REGISTERED
VALUE PER SHARE NEW YORK STOCK EXCHANGE
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
None
(Title of class)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein,
and will not be contained, to the best of registrant's knowl-
edge, in definitive proxy or information statements incorpo-
rated by reference in Part III of this Form 10-K or any amend-
ment to this form 10-K. [X]
The aggregate market value of the voting stock held by non-
affiliates of the registrant based upon the closing price on
June 2, 1997: Ordinary Shares, $.01 Par Value - $1,657,604,041
The number of shares outstanding of the registrant's stock as
of June 2, 1997: Ordinary Shares, $.01 Par Value - 37,249,529
shares.<PAGE>
TABLE OF CONTENTS
-----------------
ITEM PAGE
---------------------------------------------------------------
PART I
Item 1. Business.................................. 3
Item 2. Properties................................ 12
Item 3. Legal Proceedings......................... 12
Item 4. Submission of Matters to a Vote of
Security Holders........................ 13
PART II
Item 5. Market for Registrant's Common Equity
and Related Matters..................... 13
Item 6. Selected Financial Data................... 14
Item 7. Management's Discussion and Analysis of
Financial Condition and Results of
Operations.............................. 15
Item 8. Financial Statements and Supplementary
Data.................................... 20
Item 9. Changes in and Disagreements with
Accountants on Accounting and Financial
Disclosure.............................. 21
PART III
Item 10. Directors and Executive Officers of
the Company............................. 21
Item 11. Executive Compensation.................... 24
Item 12. Security Ownership of Certain Beneficial
Owners and Management................... 30
Item 13. Certain Relationships and Related
Transactions............................ 31
PART IV
Item 14. Exhibits, Financial Statement Schedules and
Reports on Form 8-K..................... 33
2<PAGE>
PART I
ITEM 1. BUSINESS
GENERAL
Tommy Hilfiger Corporation (the "Company"), through
its subsidiaries, designs, sources and markets designer men's
sportswear and boyswear, including woven shirts, knit shirts,
pants, swimwear, sweaters, outerwear and athletic wear. These
offerings are complemented by collections of men's tailored
clothing, dress shirts, denim products, neckwear, socks,
underwear, belts, small leather goods, sleepwear, robes,
golfwear, footwear, sunglasses, prescription eyewear, women's
casualwear and men's and women's fragrances, among others,
bearing the TOMMY HILFIGER [R] trademark, which are
produced and sold pursuant to certain licensing arrangements.
Tommy Hilfiger is the Company's principal designer and provides
leadership and direction for all aspects of the design process.
The Company's sportswear is designed to combine classic
American styling with unique details and fit to give time-
honored basics a fresh and updated look for customers who
desire high quality, designer clothes at competitive prices.
The Company was organized under the laws of the British Virgin
Islands in June 1992.
The Company's principal growth strategy has been to
expand its in-store shop program, whereby participating
retailers set aside floor space highlighted by distinctive
fixtures dedicated for the exclusive sale of the Company's
products by the retailer. The Company expects to continue to
pursue this strategy by increasing the number and size of its
in-store shops in the United States and internationally. In
the United States, the men's in-store shop program totaled
1,046 shops at March 31, 1997 compared with 866 shops at the
end of fiscal 1996. In addition, as of March 31, 1997 the
Company had established 1,069 fixtured areas in department
stores where its boyswear is sold compared with 872 at the end
of fiscal 1996. In addition, the Company continues its program
to expand certain existing shops.
In addition to continuing to expand the in-store shop
program, the Company plans to grow by broadening its range of
product offerings, both in-house and through licensing
arrangements, and by expanding its channels of distribution.
Through the expansion of its product lines, the Company
believes it will serve a wider variety of customer needs.
Since 1992, the Company has introduced several in-house
products, including boyswear, swimwear, athletic wear, caps and
bags. Additionally, the Company has introduced new products
through licensing agreements including, in fiscal 1997, a
women's fragrance pursuant to its license with Aramis, Inc., a
division of Estee Lauder Companies, prescription eyewear with
Liberty Optical, footwear with the Stride Rite Corporation and
women's casual wear marketed under a license with Pepe Jeans
London Corporation. See "Merchandising Strategies - Licensing
and Distributorships."
The Company is also pursuing several strategies to
expand its channels of distribution in the retail arena. As of
March 31, 1997, the Company operated 47 outlet stores and eight
specialty retail stores and currently plans to open
approximately eight additional outlet stores, as well as one
additional specialty retail store in London, England, by March
31, 1998. The Company also plans to open flagship stores in
Beverly Hills, California and London, England, by March 31,
1998 and March 31, 1999, respectively. See "Merchandising
Strategies - Retailing."
The Company is engaged in principally one industry
segment, the design, importation and distribution of men's
sportswear and childrenswear. Accordingly, no information is
being furnished herein or in the accompanying financial
statements relating to industry segments of the Company.
3<PAGE>
MERCHANDISING STRATEGIES
WHOLESALE
The Company's products, the majority of which are
manufactured of cotton and other natural fibers, are generally
pre-washed and generously sized to emphasize comfort and are
designed to allow consumers to blend items across its product
lines. The Company organizes its menswear and boyswear
collections into three primary product lines: Core, Core Plus
and Fashion. The boyswear line is available in boys' and young
men's sizes 4 through 20 and is being sold by the Company to
many of the same department and specialty store customers as
its menswear lines. In fiscal 1998, the Company plans to
introduce an infant and toddler line. This line is expected to
be available at retail for Holiday 1997.
Core
The Core line is comprised of the Company's
seasonless products or "basics", such as the pleated chino pant
and short, the solid knit polo shirt, the button-down oxford,
T-shirts and jackets, all in classic solid colors. Core items
are made available for sale by the Company throughout the year
and, therefore, generally are kept in stock by the Company.
Since Core items are seasonless, they do not have fixed selling
periods and, therefore, retailers' inventories of Core products
tend to be maintained throughout the year and reordered as
necessary. The Company receives orders from most of its larger
customers for Core products on an electronic data interchange
("EDI") system, which expedites reorders. See "Management
Information Systems."
Core Plus
The Core Plus line is comprised of a broad selection
of seasonal "basics" which are derived from Core but offer a
greater variety of fabrics, colors and patterns, such as
stripes and plaids. The Core Plus line also incorporates
certain Fashion products that had previously been successful at
retail. The Company sells four different seasonal groups of
Core Plus products each year. As compared to Fashion items,
Core Plus items provide the retailer with longer selling
periods at regular prices. Because Core Plus is a broader
product category than Fashion, with a longer regular-price
selling period, the Company's shipping deadlines are more
flexible and the Company may be able to place reorders when
demand is high.
Fashion
The Fashion line represents the most updated
component of the Company's product line. Fashion items consist
of a group of product classifications coordinated around a
seasonal theme selected by Tommy Hilfiger. The Company offers
Fashion products under at least three themes per season,
thereby creating a continual flow of new merchandise in the
marketplace.
LICENSING AND DISTRIBUTORSHIPS
In connection with the Company's business strategy of
expanding its market penetration through product line and
geographic expansion, the Company considers entering into
licensing and distribution agreements with respect to certain
products if the Company believes such arrangements provide more
effective manufacturing, distribution and marketing of such
products than could be achieved in-house. The Company
continually pursues new opportunities in product categories
which are believed to be complementary to its existing product
lines.
4<PAGE>
Product Licenses
Since Fall 1992, the Company has introduced several
product lines through license arrangements with companies which
are among industry leaders in their respective categories. In
addition to the women's fragrance, prescription eyewear,
footwear and women's casual wear, during 1997 the Company
signed a licensing agreement with Lantis Eyewear Corporation to
produce a complete line of men's sunglasses, which will be
introduced at retail during fiscal 1998.
The following table summarizes the Company's
significant product licensing and distributorship arrangements
in the United States as of March 31, 1997:
PRODUCTS PRODUCED UNDER THE
LICENSEE TOMMY HILFIGER [R] NAME
-------- ---------------------------
Mountain High Hosiery, Inc. Socks
Superba, Inc. Neckwear
Trafalgar, Inc. Belts and small
leather goods
Hart, Schaffner & Marx Men's suits, sport coats,
(a division of Hartmarx dress slacks, top coats,
Corporation) formal wear
Oxford Industries, Inc. Men's dress shirts
Jockey International, Inc. Men's underwear
Aramis, Inc. (a division of Fragrances
the Estee Lauder Companies.)
Russel-Newman, Inc. Robes, Sleepwear
Oxford Industries, Inc. Golfwear
Pepe Jeans London Corporation Men's, women's and girls'
jeanswear and jeans related
apparel (including women's
and girls' casual wear)
Liberty Optical Prescription eyewear
The Stride Rite Corporation Footwear
Lantis Eyewear Corporation Sunglasses
Subsequent to year-end, the Company signed a
licensing agreement with Revman Industries, Inc. to produce and
market a line of linens, bedding, bath products and related
accessories.
Each of the license arrangements described above is
an exclusive license, except for two such licenses which permit
the Company and/or certain of the Company's licensees and
certain distributors of the Company's products to continue
distributing certain products that overlap with products
covered by the licenses. The Company does not believe that
termination of any individual license arrangement would be
material to the Company.
5<PAGE>
Geographic Licenses and Distributorships
In July 1991, the Company granted an exclusive
license to an affiliate of a director of the Company and the
Chief Executive Officer of Tommy Hilfiger (HK) Limited
("THHK"), a subsidiary of the Company, to sell the Company's
products in Canada. The term of the agreement is 10 years and
is renewable at the option of the licensee subject to specified
volume limitations and other conditions. In addition, the
Company has granted an exclusive distributorship to an
unaffiliated Panamanian company to distribute the Company's
products in Central America, Venezuela, Columbia, Chile,
Ecuador and most of the nations of the Caribbean basin. The
Company also granted to an unaffiliated third party the right
to designate a licensee to sell the Company's products in
India.
In May 1995, the Company granted an exclusive
distributorship to an unaffiliated Mexican company to
distribute the Company's products in Mexico. The term of the
agreement is three years and is renewable at the option of the
licensee subject to certain limitations.
Effective July 1, 1996, the Company entered into an
exclusive license agreement for Japan with Novel-ITC Licensing
Limited, a related party. The term of this agreement is 4.5
years and is renewable at the option of the licensee subject to
certain conditions.
Effective February 1, 1997, the Company entered into
a licensing agreement with Pepe Jeans London Corporation to
distribute the Company's men's and boys' sportswear (excluding
jeanswear and jeans related apparel) throughout the European
market. The term of this agreement is five years and is
renewable at the option of the licensee subject to certain
conditions.
All of the Company's licensees and distributors are
required to contribute to the advertisement and promotion of
TOMMY HILFIGER [R] products a percentage of their net sales
of TOMMY HILFIGER [R] products or a percentage of their net
purchases of TOMMY HILFIGER [R] products (depending on the
terms of the license or distributorship agreement), subject to
minimum amounts.
RETAILING
The Company is pursuing several strategies to expand
its channels of distribution in the retail arena.
The Company believes its outlet strategy has
positioned it to take advantage of an expanding segment of the
retail apparel industry that appeals to customers' increasing
value orientation and provides the Company with an additional
channel of distribution and better control over the sale of its
inventory. The Company stocks its outlet stores with a mixture
of out-of-season products as well as first-quality products
manufactured specifically for its outlet stores' customers. As
of March 31, 1997 the Company operated 47 outlet stores and
currently plans to open approximately eight additional outlet
stores by March 31, 1998. The Company's outlet stores are
located primarily in major outlet centers in the United States.
The TOMMY HILFIGER [R] specialty retail stores
enable the Company to reach consumers who prefer the
environment of a specialty store. The Company believes that
these stores, which serve as a showcase for both the sportswear
and certain licensed product lines, will complement its
wholesale business by increasing brand awareness. As of March
31, 1997, the Company operated eight specialty retail stores.
In fiscal 1997, the Company signed a lease agreement for a
specialty store in London, England. This store is expected to
open in fiscal 1998. As a result of the shop expansion
program, the Company has refined its specialty retail strategy.
These shops are the Company's vision for specialty retailing in
malls, therefore, the Company does not plan to expand its
existing base of specialty retail stores. See "Properties".
6<PAGE>
During fiscal 1996, the Company signed a lease for
the first TOMMY HILFIGER [R] Flagship store, located on
Rodeo Drive in Beverly Hills, California. During fiscal 1997,
the Company signed an agreement for the lease of a TOMMY
HILFIGER [R] Flagship store in London, England. These
stores, which are expected to open in fiscal 1998 and fiscal
1999, respectively, will serve as showcases for all of the
Company's products as it seeks to propel the brand into the
elite circle of designers with international recognition. This
investment underlines the Company's strong belief in the role
of flagships as image builders. These stores are planned to be
followed by flagships in key markets such as New York City.
DESIGN
Tommy Hilfiger is the Company's principal designer
and provides leadership and direction for all aspects of the
design process. Tommy Hilfiger selects designers on the basis
of their understanding of the retail industry and their ability
to understand what consumers desire and which designs are most
likely to be commercially viable. Design teams, which are
typically comprised of a designer and assistant designer, are
responsible for separate product classifications. In addition,
the Company has a senior designer, whose responsibility is to
coordinate the design teams. Design teams utilize computer
aided designs, which provide timely translation of designs into
sample depictions varying in color, cut and style, the speed of
production and breadth of the resulting output assist the
Company in selecting desirable designs for the sourcing and
research and development staffs to assess.
RESEARCH AND DEVELOPMENT
The Company employs a senior production executive who
oversees a staff whose primary functions are to identify ways
to develop new designs and products more efficiently, and to
identify new and more cost-effective sourcing methods. This
group receives new product direction from Tommy Hilfiger and
then researches and develops the potential product. This
process is designed to avoid costly attempts to develop
products that require designs or production methods that are
not efficient. In addition, the staff researches and
identifies new sources for both fabrics and manufacturing
worldwide in order to control or reduce manufacturing costs
while maintaining the Company's quality standards.
SALES AND MARKETING
TOMMY HILFIGER [R] products are sold in over
2,000 department and specialty retail store locations. The
Company's department store customers include major United
States retailers such as Dillard Department Stores, Federated
Department Stores (including Macy's, Bloomingdale's, and
Burdines), The May Department Stores Company (including Lord &
Taylor and Foley's), Belk Stores and Dayton Hudson. The
Company believes that its relationships with major retailers,
including the active sales involvement of the Company's senior
management, are important elements of its marketing strategy.
The Company's strategy is to continue to grow by broadening its
United States in-store shop program, expanding its product
lines and marketing to new customers both in the United States
and internationally.
A significant aspect of the Company's ability to
increase the commitment of its existing customers and to
attract new customers is its in-store shop program, whereby
participating retailers set aside floor space highlighted by
distinctive fixtures dedicated for exclusive sale of the
Company's products by the retailer. This program enables the
retailer to create an environment consistent with the Company's
image and to display and stock a greater volume of the
Company's products per square foot of retail space. Such shops
encourage longer term commitment by the retailer to the
Company's products, including the retailer's provision of
upgraded staffing. These shops also increase consumer product
recognition and loyalty because of the retail customer's
familiarity with the location of the Company's products in the
store. A program of installing distinctive fixtures in certain
department stores which carry the boyswear line was implemented
in fiscal 1994. The continued expansion of the Company's in-
store shop
7<PAGE>
and fixturing programs is dependent on market conditions,
including continued demand for the Company's products.
The Company's sales and marketing departments have
individuals located in the Company's New York headquarters,
Atlanta and Dallas showrooms and Los Angeles, Chicago,
Philadelphia, San Francisco and Cincinnati regional sales
territories. The sales force sells only the TOMMY HILFIGER
[R] collection.
The Company employs a staff of approximately 120
merchandise coordinators located throughout the United States.
These merchandisers educate the retailers' salespeople about
the Company's current products, provide the Company with first-
hand consumer feedback concerning consumer reaction to the
Company's products and coordinate the in-store displays with
the department stores. In addition to the coordinator program,
the Company also conducts a training program for the department
stores' TOMMY HILFIGER [R] selling specialists. The program is
designed to educate specialists on the Company's image and
merchandising standards and to promote the development and
servicing of clientele. The program educates specialists in
customer assistance and advice, including merchandise selection
and the coordination of complete outfits of TOMMY HILFIGER [R]
products. Over 1,000 specialists have completed the program.
The Company sells substantially all its out-of-season
products, which are principally from the Fashion and Core Plus
product lines, to certain discount retailers and through its
Company owned outlet stores. The net revenues from such sales
represented less than 15% of the Company's net revenue for each
of the last three fiscal years.
ADVERTISING, PUBLIC RELATIONS AND PROMOTION
The Company believes that advertising to promote and
enhance the TOMMY HILFIGER [R] brand and the image of TOMMY
HILFIGER [R] products is important to its long- term growth
strategy. All of the Company's licensees and distributors are
required to contribute to the advertisement and promotion of
TOMMY HILFIGER [R] products a percentage of their net sales of
TOMMY HILFIGER [R] products or a percentage of their net
purchases of TOMMY HILFIGER [R] products (depending on the
terms of the license or distributorship agreement), subject to
minimum amounts. Advertising by the Company, its licensees
and most of its distributors is coordinated by the Company and
principally appears in magazines, newspapers, and outdoor
advertising media. In addition, selected personal appearances
by Tommy Hilfiger, corporate sponsorships and charitable
programs are utilized to further enhance awareness of the
Company's image and promote the Company's products. The
Company employs an advertising and public relations staff to
implement these efforts.
SOURCING
The Company's sourcing strategy is to contract for
the manufacture of its products. Outsourcing allows the
Company to maximize production flexibility while avoiding
significant capital expenditures, work-in-process inventory
buildups and the costs of managing a large production work
force. The Company inspects products manufactured by
contractors to determine whether they meet the Company's
standards. See "Quality Control."
The Company imports most of its finished goods
because it believes it can import higher quality products at
lower costs. Management maintains extensive and long-term
relationships with leading manufacturers in the Far East,
including manufacturers located in Indonesia, Thailand and
Taiwan, among other countries. The Company monitors duty,
tariff and quota-related developments and continually seeks to
minimize its potential exposure to duty, tariff and quota-
related risks through, among other measures, geographical
diversification of its manufacturing sources, the maintenance
of its buying offices in Hong Kong, Macau, Singapore and India,
allocation of production to
8<PAGE>
merchandise categories where more quota is available and shifts
of production among countries and manufacturers.
The Company's production and sourcing staff oversees
all aspects of apparel manufacturing and production, the
negotiation for raw materials and research and development of
new products and sources. The Company operates buying offices
based in Hong Kong, Macau, Singapore and India, as well as the
United States which perform product development, sourcing,
production scheduling and quality control. In addition, the
Company contracts with various buying subagents and perform
similar services for the Company's licensees and distributors
in Canada, Mexico, Japan and Panama, which services Central and
South America, for specified commissions.
The Company has its products manufactured according
to plans prepared each year which reflect prior years'
experience, current fashion trends, economic conditions and
management estimates of a line's performance. The Company
separately negotiates with suppliers for the sale of required
raw materials which are then purchased by its contractors in
accordance with the Company's specifications. The Company
limits its exposure to holding excess inventory by committing
to purchase a portion of total projected demand and the
Company, in its experience, has been able to satisfy its excess
demand through reorders. The Company believes that its policy
of limiting its commitments for purchases early in the season
reduces its exposure to excess inventory and obsolescence.
The Company does not have long-term formal
arrangements with any of its suppliers; however, the Company
has experienced only limited difficulty in satisfying its raw
material and finished goods requirements. Although the loss of
such suppliers could have a significant effect on the Company's
immediate operating results, the Company believes it could
replace such suppliers without a material adverse effect on the
Company.
The Company has its executive offices in Hong Kong
and its principal buying offices in Hong Kong and Macau. Hong
Kong is presently a British Crown Colony, but sovereignty over
Hong Kong will be transferred effective July 1, 1997 from the
United Kingdom to the People's Republic of China ("China").
Macau is presently a Portuguese colony, but sovereignty over
Macau will be transferred effective January 1, 1999 from the
Republic of Portugal to China. If Hong Kong or Macau were to
impose income or withholding taxes on the Company or in the
event of an adverse change in their business climate, the
Company believes it could relocate its executive and principal
buying offices without a material adverse effect on the
Company.
QUALITY CONTROL
The Company's quality control program is designed to
ensure that purchased goods meet the Company's standards. The
Company inspects prototypes of each product prior to cutting by
the contractors and performs two in-line inspections and a
final inspection prior to shipment. All finished goods are
shipped to the Company's New Jersey facilities for re-
inspection and distribution. While the Company's return policy
permits customers to return defective products for credit, less
than 1% of the Company's shipments in fiscal 1997 were returned
as defective under this policy.
MANAGEMENT INFORMATION SYSTEMS
The Company believes that high levels of automation
and technology are essential to maintain its competitive
position and the Company continues to invest in computer
hardware, systems applications and networks to enhance and to
speed the apparel design process, to support the sale and
distribution of products to its customers and to improve the
integration and efficiency of its United States and Far East
operations. The Company utilizes computer-aided design
stations for use by Tommy Hilfiger and his design teams, which
provide timely translations of designs into sample depiction's
varying in color, cut and style. The Company also uses an EDI
system to receive on-line orders from its customers and to
accumulate sales information on its
9<PAGE>
products. The EDI technology enables the Company to provide
valuable sales information and inventory maintenance
information services to its customers who have adopted such
technology. Nine of the Company's 10 largest customers
communicate with the Company through EDI technology.
DISTRIBUTION
Wholesale distribution is centralized in a 360,000
square foot New Jersey facility to which all products are
shipped. The facility is operated and principally staffed by
an independent contractor who charges the Company on the basis
of the number of items processed, subject to a minimum annual
fee. The Company has the right, at any time during the
contract period, to terminate the distribution agreement by
making a specified payment. In addition, the Company leases a
200,000 square foot facility in New Jersey for retail
distribution. The Company maintains its distribution
management group and certain administrative functions at its
New Jersey facilities. The Company believes that these
distribution facilities are adequate for the Company's current
level of sales, and provide the Company with enough space and
flexibility to support the continued growth of the Company's
business.
CREDIT AND COLLECTION
The Company collects substantially all of its
receivables through a credit company pursuant to an agreement
whereby the credit company pays the Company after the credit
company receives payment from the Company's customer. If the
customer becomes bankrupt or insolvent or the receivable
becomes 120 days past due, the credit company pays the Company
50% of the outstanding receivable. The credit company
establishes maximum credit limits for each customer account.
Substantially all accounts receivable are pledged as collateral
under a bank financing agreement.
Despite the bankruptcy of several large retailers in
recent years, the Company has not experienced any increase in
its bad debts. Bad debts as a percentage of net sales were
less than 0.1% in fiscal 1997.
On April 8, 1997, the Company amended and extended
the terms of the agreement with the credit company. Under the
new terms, in exchange for a reduction of the fees charged by
the credit company, the term of the agreement was extended to
March 2001.
TRADEMARKS
The Company utilizes four principal registered
trademarks which it owns: the name TOMMY HILFIGER [R],
the Company's distinctive flag logo, the crest and the green
eyelet the Company uses on certain of its products. Tommy
Hilfiger Licensing, Inc. ("THLI"), a subsidiary of Tommy
Hilfiger U.S.A. Inc. ("TH USA") which is a subsidiary of the
Company, has registered these trademarks for use in the United
States and has registered or applied for registration of these
trademarks in numerous countries in North America, Europe,
Asia, South America and elsewhere. The Company regards its
trademarks and other proprietary rights as valuable assets in
the marketing of its products. THLI is a party to an agreement
with Mr. Hilfiger that restricts the sale, lease, license or
other conveyance of THLI's trademarks, the amendment of the
license agreement between THLI and TH USA or the creation of
any lien on THLI trademarks without Mr. Hilfiger's consent
until Mr. Hilfiger's death or his termination of employment
with TH USA without the consent of TH USA.
BACKLOG
The Company generally receives orders approximately
three to five months prior to the time the products are
delivered to stores. Thus, the Company's backlog of orders,
which the Company believes, based on industry practice and past
experience, will result
10<PAGE>
in sales, at March 31, 1997 represents a significant portion of
the Company's expected sales through September 30, 1997. At
March 31, 1997, the Company's backlog of orders was
approximately $283 million, compared to approximately $216
million at March 31, 1996. The Company's backlog depends upon
a number of factors, including the timing of "market weeks"
during which a significant percentage of the Company's orders
are received and the timing of shipments. Accordingly, a
comparison of backlog from period to period is not necessarily
meaningful and may not be indicative of eventual actual
shipments.
SEASONALITY; UNCERTAINTIES IN APPAREL RETAILING
The Company's business is impacted by the general
seasonal trends that are characteristic of many companies in
the apparel industry in which sales and profits are highest in
the fourth calendar quarter. However, due primarily to the
significant growth that the Company has experienced, quarterly
sales and profit trends and working capital requirements did
not reflect the normal apparel industry seasonality. In future
years, the Company expects its seasonal sales and profits will
more closely reflect typical apparel and retail industry trends
than they have in the past.
The apparel industry historically has been subject to
substantial cyclical variations. Although the Company's recent
results have not been substantially impacted by such
variations, a recession in the general economy or uncertainties
regarding future economic prospects that effect consumer
spending habits could have a material effect on the Company's
results of operations.
COMPETITION
The men's sportswear segment of the apparel industry
is highly competitive. Specifically, the Company encounters
substantial competition in the designer men's sportswear
business, including competition from Polo/Ralph Lauren,
Nautica, Perry Ellis, Calvin Klein and Claiborne, as well as
from certain non-designer lines. Some of the Company's
competitors are significantly larger and more diversified, and
have substantially greater resources, than the Company. The
Company competes primarily on the basis of fashion, price,
quality and service. The Company believes its competitive
position depends upon its ability to anticipate and respond
effectively to changing consumer demands and to offer fashion
conscious customers a wide variety of high quality apparel at
competitive prices.
The boyswear segment of the apparel industry is also
highly competitive. The Company's competition in this market
is primarily Polo/Ralph Lauren and certain non-designer lines.
Consistent with its menswear product lines, the Company
competes in the boyswear segment primarily on the basis of
fashion, price, quality and service and believes that its
competitive position depends upon its ability to anticipate and
respond effectively to changing consumer demands.
DEPENDENCE ON CUSTOMERS UNDER COMMON CONTROL
The Company's department store customers include
major United States retailers, certain of which are under
common ownership. When considered together as a group under
common ownership, sales to the department store customers which
were owned by Federated Department Stores, Dillard Department
Stores, and The May Department Stores Company accounted for
approximately 23%, 21%, and 16%, respectively, of fiscal 1997
net wholesale product sales. A decision by the controlling
owner of a group of department stores to decrease the amount
purchased from the Company or to cease carrying the Company's
products could adversely affect the Company.
11<PAGE>
EMPLOYEES
At March 31, 1997, the Company had approximately
1,130 full-time employees and 440 part-time employees.
Virtually all of the Company's part-time employees were
employed in the Company's specialty retail and outlet stores.
None of the Company's employees is a member of a union. The
Company considers its relations with its employees to be
excellent.
ITEM 2. PROPERTIES
The principal executive offices of the Company are
located at 6/F, Precious Industrial Centre, 18 Cheung Yue
Street, Cheung Sha Wan, Kowloon, Hong Kong. TH USA's principal
executive offices are located at 25 West 39th Street, New York,
New York 10018.
The general location, use and approximate size of the
principal properties which the Company currently occupies, all
of which were leased as of March 31, 1997, except for the Hong
Kong office space and a New York property which houses the
Company's executive offices and its primary sales, marketing
and licensing offices and its main sales and licensees'
showrooms, are set forth below:
<TABLE>
<CAPTION>
Approximate
Area in Square
Location Use Feet
-------- --- ----------------
<S> <C> <C>
Hong Kong Executive offices and
principal buying office 20,000
New York, New York TH USA headquarters and
sales offices 186,000
Edison, New Jersey(1) Administrative offices 19,000
South Brunswick, Warehouse distribution and
New Jersey administrative offices 360,000
(1)The Company's warehouse space in Edison, New Jersey, which
is maintained, operated and principally staffed by an
independent contractor, is not included in the square footage
description.
</TABLE>
The Company operates 47 outlet stores, each averaging
approximately 3,300 square feet, generally located in major
outlet centers in the U.S., and the Company operates eight
retail stores in metropolitan areas, each averaging
approximately 3,800 square feet. The Company has entered into
lease agreements for future stores of 20,000 square feet in
Beverly Hills, California and 18,000 and 2,600 square feet,
respectively, for two stores in London, England. In addition,
the Company has two regional showrooms outside of New York
City. All of such stores and showrooms are leased.
ITEM 3. LEGAL PROCEEDINGS
The Company and its subsidiaries are from time to
time involved in routine legal matters incidental to their
businesses. In the opinion of the Company's management, the
resolution of these matters will not have a material effect
on its financial position or its results of operations.
12<PAGE>
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not Applicable
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
MATTERS
The Company's Ordinary Shares, par value U.S. $0.01,
are listed and traded on the New York Stock Exchange under the
symbol "TOM." As of June 2, 1997, there were approximately 642
record holders of the outstanding Ordinary Shares.
The following table sets forth, for each of the
periods indicated, the high and low sales prices per Ordinary
Share as reported on the New York Stock Exchange Composite
Tape.
High Low
---- ---
Fiscal Year ended March 31, 1997
First Quarter.............................. 55 7/8 41 1/2
Second Quarter............................. 59 3/8 41 3/4
Third Quarter.............................. 61 1/8 44 1/8
Fourth Quarter............................. 59 1/8 42 1/2
Fiscal Year ended March 31, 1996
First Quarter.............................. 29 1/8 20 5/8
Second Quarter............................. 37 7/8 27 1/8
Third Quarter.............................. 45 3/4 29 5/8
Fourth Quarter............................. 48 32 5/8
In the past two fiscal years, the Company has not
paid any dividends. The Company anticipates that all of its
earnings in the foreseeable future will be retained for the
development and expansion of its business and, therefore, has
no current plans to pay cash dividends. Future dividend policy
will depend on the Company's earnings, capital requirements,
financial condition, restrictions imposed by the Company's
credit agreement, availability of dividends, receipt of funds
in connection with repayment of loans to subsidiaries or
advances from operating subsidiaries and other factors
considered relevant by the Board of Directors of the Company.
For certain restrictions on the Company's ability to pay
dividends, see "Management's Discussion and Analysis of
Financial Condition and Results of Operations - Liquidity and
Capital Resources" in Item 7.
13<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
SELECTED CONSOLIDATED FINANCIAL DATA
The following selected financial data have been
derived from the Company's Consolidated Financial Statements.
The information should be read in conjunction with the
Consolidated Financial Statements and related Notes thereto
that appear elsewhere in this Annual Report and Management's
Discussion and Analysis of Financial Condition and Results of
Operations set forth in Item 7.
<TABLE>
<CAPTION>
Fiscal Year Ended March 31,
--------------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
(in thousands, except per share amounts)
<S> <C> <C> <C> <C> <C>
Statement of Operations Data:
----------------------------
Net revenue......................... $661,688 $478,131 $320,985 $227,201 $138,638
Cost of goods sold.................. 344,884 258,419 174,584 127,053 81,502
-------- -------- -------- -------- --------
Gross profit........................ 316,804 219,712 146,401 100,148 57,136
Selling, general and
administrative expenses........... 190,976 132,270 85,954 58,702 33,156
-------- -------- -------- -------- --------
Income from operations.............. 125,828 87,442 60,447 41,446 23,980
Interest expense.................... 761 754 207 317 1,348
Investment income................... (6,181) (5,712) (3,217) (637) (219)
-------- -------- -------- -------- --------
Income before income taxes and
minority interest................. 131,248 92,400 63,457 41,766 22,851
Provision for income taxes.......... 44,866 30,900 22,742 16,422 8,220
Minority interest in
subsidiary (1).................... -- -- -- -- 25
-------- -------- -------- -------- --------
Net income.......................... $86,382 $61,500 $40,715 $25,344 $14,606
======== ======== ======== ======== ========
Net income per share
and share equivalents............. $2.28 $1.65 $1.12 $.77 $.55
===== ===== ===== ===== =====
Weighted average shares and share
equivalents outstanding........... 37,885 37,241 36,346 32,836 26,394
======== ======= ======== ======== ========
<CAPTION>
As of March 31,
---------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
(in thousands)
<S> <C> <C> <C> <C> <C>
Balance Sheet Data:
------------------
Cash, cash equivalents and
short-term investments........... $109,908 $127,743 $86,031 $50,867 $18,671
Working capital.................... 270,667 238,439 165,261 110,589 53,748
Total assets....................... 463,085 358,622 239,493 190,378 84,704
Short-term borrowings.............. 5,980 13,755 13,487 10,319 8,068
Long-term debt..................... 1,510 1,789 2,064 2,341 --
Shareholders' equity............... 397,464 301,338 209,024 161,715 68,700
(1)Amounts represent dividends declared on Tommy Hilfiger,
Inc.'s 10% cumulative preferred stock held by an affiliate of
the Company. No dividends have been declared on the Ordinary
Shares.
</TABLE>
14<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
All references to years relate to the fiscal year
ended March 31 of such year.
RESULTS OF OPERATIONS
The following table sets forth, for the periods
indicated, the percentage relationship to net revenue of
certain items in the Company's consolidated statements of
operations:
Fiscal Year Ended March 31,
---------------------------
1997 1996 1995
---- ---- ----
Net revenue..................... 100.0% 100.0% 100.0%
Cost of goods sold.............. 52.1 54.0 54.4
----- ----- -----
Gross profit.................... 47.9 46.0 45.6
Selling, general and
administrative expenses....... 28.9 27.7 26.8
---- ---- ----
Income from operations.......... 19.0 18.3 18.8
Interest expense................ 0.1 0.2 --
Investment income............... 0.9 1.2 1.0
---- ---- ----
Income before income taxes...... 19.8 19.3 19.8
Provision for income taxes...... 6.7 6.4 7.1
---- ---- ----
Net income...................... 13.1% 12.9% 12.7%
==== ==== ====
Year Ended March 31, 1997 Compared to Year Ended March 31, 1996
The Company's net income increased to $86,382,000, or
$2.28 per share, in 1997 from $61,500,000, or $1.65 per share,
in 1996. This represents an improvement of $24,882,000 or
40.5%. As a percentage of net revenue, net income increased to
13.1% in 1997 from 12.9% in 1996.
Net revenue increased 38.4% to $661,688,000 in 1997
from $478,131,000 in 1996. This increase is a result of
improvements in each of the Company's wholesale, retail, and
licensing and buying agency divisions, as outlined below.
Wholesale net revenue increased to $479,307,000 in
1997 from $381,239,000 in 1996, an improvement of 25.7%. This
improvement includes a 23.9% increase in menswear wholesale
sales, to $405,319,000 in 1997 from $327,189,000 in 1996, and a
36.9% increase in boyswear wholesale sales, to $73,988,000 in
1997 from $54,050,000 in 1996. These increases were primarily
due to volume increases as a result of increased sales to
existing customers, opening new in-store shops and fixtured
areas, and the expansion of certain existing shops. The number
of men's in-store shops increased to 1,046 at March 31, 1997
from 866 at March 31, 1996 while the number of boyswear
fixtured areas increased to 1,069 at March 31, 1997 from 872 at
March 31, 1996. In addition to the volume increase, the change
in product mix of the Company's wholesale sales resulted in a
higher average unit selling price. Of the total wholesale
sales increase, approximately 67% was due to volume and
approximately 33% was due to the increased average unit selling
price.
Net revenue in the Company's retail division
increased 81.6% to $149,312,000 in 1997 from $82,212,000 in
1996. This improvement was due to an increase in the number of
stores open as well as increased sales at existing stores. Of
the total increase of $67,100,000, $31,503,000 was attributable
to new retail stores opened during 1997. The total number of
retail stores open as of March 31, 1997 and 1996 was 55 and 44,
respectively.
15<PAGE>
Net revenue from licensing royalties and buying
agency commissions increased 125.3% to $33,069,000 in 1997 from
$14,680,000 in 1996. This increase reflects the incremental
revenue associated with newly licensed products and a general
increase in sales from existing licensees and buying agency
services. Of this increase, approximately 35% was due to
products introduced under new licenses in 1997 while the
balance was due to licenses existing as of March 31, 1996.
Gross profit improved to 47.9% of net revenue in 1997
from 46.0% of net revenue in 1996. This increase was
attributable to the increases in retail operations and
royalties and buying agency commissions, each of which had
higher percentage revenue increases, and which produce higher
margins, than wholesale operations. In addition, wholesale
margins have increased due primarily to the change in mix of
products sold.
Selling, general and administrative expenses
increased as a percentage of net revenue to 28.9% in 1997 from
27.7% in 1996. The increased percentage was due to an increase
in marketing and advertising expense to promote and enhance the
brand name and the image of the Company's products. Selling,
general and administrative expenses increased to $190,976,000
in 1997 from $132,270,000 in 1996. This increase was
principally due to increased volume-related expenses to support
the higher revenue and the increased marketing and advertising
expenses mentioned above.
The provision for taxes increased to 34.2% of income
before taxes in 1997 from 33.4% in 1996. This increase was
primarily attributable to the relative level of earnings in the
various taxing jurisdictions to which the Company's earnings
are subject.
Year Ended March 31, 1996 Compared to Year Ended March 31, 1995
Net income for 1996 improved to $61,500,000, or $1.65
per share, from $40,715,000, or $1.12 per share, in 1995. This
represented an increase of $20,785,000 or 51.0%. In addition,
net income as a percentage of net revenue increased to 12.9% in
1996 from 12.7% in 1995.
The Company's net revenue for 1996 increased to
$478,131,000, compared to $320,985,000 in 1995. This
improvement of 49.0% reflects the increased demand for the
Company's products. Substantially all of the wholesale sales
increase was due to volume increases, which in turn were
primarily the result of the continuing expansion of the in-
store shop program. The number of men's in-store shops
increased to 866 at March 31, 1996 from 658 at March 31, 1995
and the number of boyswear fixtured areas increased to 872 at
March 31, 1996 from 486 at March 31, 1995. Increased sales to
existing and new customers and new store locations also
contributed to the wholesale sales increase. Menswear
wholesale sales improved $72,312,000 or 28.4% from $254,877,000
in 1995 to $327,189,000 in 1996 while boyswear wholesale sales
improved $21,815,000 or 67.7% from $32,235,000 in 1995 to
$54,050,000 in 1996.
The Company's retail division also contributed to the
increased revenue level. Retail revenue increased $54,666,000
or 198.5% from $27,546,000 in 1995 to $82,212,000 in 1996.
This increase was due to the addition of 18 new stores during
1996 as well as increased revenue in existing stores. Of the
total increase, $22,645,000 was attributable to new retail
stores opened in 1996. At March 31, 1996, a total of 44 stores
were open.
Net revenue from licensing royalties and buying
agency commissions increased 132.0% from $6,327,000 in 1995 to
$14,680,000 in 1996. This improvement principally resulted
from an increase in sales of existing licensed products as well
as the introduction of several new licensed products, including
a men's fragrance, robes and sleepwear, and golfwear. Of this
increase, approximately 37% was due to products introduced
under new licenses in 1996 while the balance was due to
licenses existing as of March 31, 1995.
Gross profit as a percentage of net revenue increased
from 45.6% in 1995 to 46.0% in 1996. This increase was
primarily attributable to the relative increase in retail
operations and royalties and buying agency commissions, all of
which produce higher margins than wholesale operations.
Offsetting this increase was a decrease in wholesale margins
which was principally the
16<PAGE>
result of an increase in the relative level of boyswear
products which generally produce lower margins than menswear,
the mix of products and an overall increase in product costs.
Selling, general and administrative expenses
increased to $132,270,000 in 1996 from $85,954,000 in 1995.
This increase was primarily attributable to increased volume
related expenses necessary to support the increase in revenue
of the Company's wholesale and retail operations. In addition,
depreciation and amortization increased due to the greater
number of in-store shops. As a percentage of net revenue,
selling, general and administrative expenses increased to 27.7%
from 26.8% due to the continued expansion of the Company's
retail division, which operates at a higher cost structure than
its wholesale operations, and a one time charge of $2,350,000
taken by the Company to reflect the current cost of a
consulting agreement with a former executive.
The provision for income taxes decreased to 33.4% of
income before taxes in 1996 from 35.8% in 1995. The decrease
was primarily attributable to the relative level of earnings in
various taxing jurisdictions to which the Company's earnings
are subject.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary funding requirements are to
finance working capital and the continued growth of the
business. This includes primarily the purchase of inventory in
anticipation of increased sales of the wholesale and retail
divisions as well as capital expenditures related to the
expansion of the menswear in-store shop and boyswear fixtured
area programs and additional retail stores. The Company's
sources of liquidity are cash on hand, cash from operations and
the Company's available credit.
The Company's cash and cash equivalents balance has
decreased from $127,743,000 at March 31, 1996 to $109,908,000
at March 31, 1997. The principal reason for this decrease is
capital expenditures, including the Company's purchase of the
property which houses its executive offices along with its
primary sales, marketing and licensing offices and its main
sales and licensees' showrooms for approximately $25,875,000,
offset in part, by cash provided by operations.
Net cash provided by operating activities in 1997 was
$64,435,000, an increase of $24,776,000 over the 1996 amount of
$39,659,000. The primary factor that contributed to this
increase was the increase in net income before depreciation and
amortization offset, in part, by an increase in working
capital. The increase in working capital was principally due
to a higher inventory level which is the result of a planned
build-up in anticipation of the summer and fall seasons of
fiscal 1998 and the increased retail division inventory due to
the greater number of stores, as well as an increase in Core
inventory to meet the demands of the Company's replenishment
business. Inventory increased from $81,428,000 at March 31,
1996 to $123,847,000 at March 31, 1997, an increase of
$42,419,000 or 52.1%.
Capital expenditures were $83,960,000 in 1997,
compared with $28,694,000 in 1996. The increase in capital
expenditures was primarily related to the purchase of the
property mentioned above as well as the expansion of the
Company's in-store shop and fixtured area programs. The
Company has continued to install new in-store shops and
fixtured areas, as well as expand several shops which were
previously open. The Company installed 377 menswear in-store
shops and boyswear fixtured areas during 1997 and 594 menswear
in-store shops and boyswear fixtured areas during 1996.
Additionally, the Company opened 11 outlet stores in 1997.
In July 1996, the Company entered into an amended and
restated revolving credit agreement (the "Credit Agreement")
effective April 1, 1996. The Credit Agreement, which expires
in June 1999, provides for direct borrowings, bankers
acceptances and letters of credit of amounts ranging from
$100,000,000 in fiscal 1997 to $150,000,000 in fiscal 1999.
Available borrowings are subject to the timed increase of
availability under the Credit Agreement and are based upon
eligible accounts receivable, inventory and open letters of
credit. As of March 31, 1997, $100,000,000 was available for
utilization under the Credit Agreement, of which
17<PAGE>
$66,822,000 had been used to open letters of credit.
Obligations under the Credit Agreement are collateralized by
substantially all the assets of the Company's U.S. operations.
Direct borrowings under the Credit Agreement, which are limited
to $60,000,000, accrue interest at varying interest rates.
At March 31, 1997, total short-term borrowings of
$5,980,000 consisted of open letters of credit for inventory
purchased of $5,705,000 and the current portion of mortgage
debt payable of $275,000. Additionally, at March 31, 1997, TH
USA was contingently liable for unexpired bank letters of
credit of $61,117,000 related to commitments of TH USA to
suppliers for the purchase of inventories and leases.
The Credit Agreement contains various covenants.
Among other matters, the Credit Agreement includes certain
restrictions upon capital expenditures, investments,
indebtedness, loans and advances and transactions with related
parties. In addition, the Credit Agreement prohibits certain
of the Company's operating subsidiaries, which are borrowers or
guarantors under the Credit Agreement, from paying dividends.
Because THC is a holding company, dividends or other advances
from its subsidiaries will be required to fund any cash
dividends to holders of Ordinary Shares. The Credit Agreement
also requires the maintenance of minimum tangible net worth and
interest coverage ratios. The Company was in compliance with
all covenants under the Credit Agreement as of, and for the
year ended, March 31, 1997.
Cash requirements in 1998 will primarily include
capital expenditures relating to the in-store shop and fixtured
area programs and the opening of approximately eight additional
outlet stores and one additional specialty retail store, as
well as the flagship stores in Beverly Hills, California and
London, England. The amount of total committed capital
expenditures at March 31, 1997, including expenditures relating
to these projects, was approximately $14,000,000. The Company
believes the amount of capital expenditures for 1998 will be
consistent with 1997 and intends to fund cash requirements in
1998 and future years from available cash balances, internally
generated funds and available credit. The Company believes
that these resources will be sufficient to fund its cash
requirements for such periods.
INFLATION
The Company does not believe that the relatively
moderate rates of inflation experienced over the last few years
in the United States, where it primarily competes, have had a
significant effect on its net revenue or profitability. Higher
rates of inflation have been experienced in a number of foreign
countries in which the Company's products are manufactured but
have not had a material effect on the Company's net revenue or
profitability. The Company has been able to partially offset
its cost increases by increasing prices or changing suppliers.
EXCHANGE RATES
The Company receives United States dollars for
substantially all of its product sales and its licensing
revenues. Inventory purchases from contract manufacturers
throughout the world are denominated in United States dollars;
however, purchase prices for the Company's products may be
impacted by fluctuations in the exchange rate between the
United States dollar and the local currencies of the contract
manufacturers, which may have the effect of increasing the
Company's cost of goods in the future. During the last three
fiscal years, exchange rate fluctuations have not had a
material impact on the Company's inventory costs; however, due
to the number of currencies involved and the fact that not all
foreign currencies react in the same manner against the United
States dollar, the Company cannot quantify in any meaningful
way the potential effect of such fluctuations on future income.
The Company does not engage in hedging activities with respect
to such exchange rate risk.
18<PAGE>
RECENTLY ISSUED ACCOUNTING STANDARDS
Earnings Per Share. In February 1997, the Financial Accounting
Standards Board ("FASB") issued Statement No. 128, Earnings per
Share, which specifies the computation, presentation and
disclosure requirements for earnings per share. Management of
the Company believes that adoption of Statement No. 128, which
is required for fiscal year 1998, will not have a material
impact on the Company's earnings per share calculation.
Disclosure of Information about Capital Structure. In February
1997, the FASB issued Statement No. 129, Disclosure of
Information about Capital Structure, which requires an entity
to explain the pertinent rights and privileges of its various
securities outstanding. Management of the Company believes
that adoption of Statement No. 129 will not have a significant
impact on the Company's present disclosure.
SAFE HARBOR STATEMENT
Safe Harbor Statement under the Private Securities Litigation
Reform Act of 1995. In addition to the historical information
contained herein, there are matters discussed which are hereby
identified as "forward-looking statements" for purposes of the
Safe Harbor Statement. These forward-looking statements
involve risks and uncertainties, including but not limited to
economic, competitive, governmental and technological factors
affecting the Company's operations, markets, products, services
and prices.
19<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Index to Consolidated Financial Statements
Report of Independent Accountants
Consolidated Statements of Operations for the years ended March
31, 1997, 1996, 1995
Consolidated Balance Sheets as of March 31, 1997 and 1996
Consolidated Statements of Cash Flows for the years ended March
31, 1997, 1996 and 1995
Consolidated Statements of Changes in Shareholders' Equity for
the years ended March 31, 1997, 1996 and 1995
Notes to Consolidated Financial Statements
20<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
Report of Independent Accountants...................... F-2
Consolidated Statements of Operations
for the years ended March, 31, 1997, 1996 and 1995..... F-3
Consolidated Balance Sheets as of
March 31, 1997 and 1996................................ F-4
Consolidated Statements of Cash Flows
for the years ended March 31, 1997,
1996, and 1995......................................... F-5
Consolidated Statements of Changes
in Shareholders' Equity for the years
ended March 31, 1997, 1996, and 1995................... F-6
Notes to Consolidated Financial Statements............. F-7
F-1<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of
Tommy Hilfiger Corporation
In our opinion, the consolidated financial statements listed in
the index appearing under Item 14(a)(1) and (2) of this Annual
Report on Form 10-K present fairly, in all material respects,
the financial position of Tommy Hilfiger Corporation and its
subsidiaries at March 31, 1997 and 1996, and the results of
their operations and their cash flows for each of the three
years in the period ended March 31, 1997, in conformity with
generally accepted accounting principles. These financial
statements are the responsibility of the Company's management;
our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of
these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made
by management, and evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable
basis for the opinion expressed above.
/s/ PRICE WATERHOUSE LLP
PRICE WATERHOUSE LLP
New York, New York
May 21, 1997
F-2<PAGE>
TOMMY HILFIGER CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
For The Fiscal Year Ended March 31,
-----------------------------------
1997 1996 1995
---- ---- ----
Net revenue.................... $661,688 $478,131 $320,985
Cost of goods sold............. 344,884 258,419 174,584
-------- -------- --------
Gross profit................... 316,804 219,712 146,401
Selling, general and
administrative expenses...... 190,976 132,270 85,954
-------- -------- --------
Income from operations......... 125,828 87,442 60,447
Interest expense............... 761 754 207
Investment income.............. 6,181 5,712 3,217
----- ----- -----
Income before income taxes..... 131,248 92,400 63,457
Provision for income taxes..... 44,866 30,900 22,742
-------- -------- --------
Net income..................... $86,382 $61,500 $40,715
======== ======== ========
Earnings per share and
share equivalents............ $ 2.28 $ 1.65 $ 1.12
======== ======== ========
Weighted average shares and
share equivalents
outstanding.................. 37,885 37,241 36,346
======== ======== ========
See accompanying Notes to Consolidated Financial Statements.
F-3<PAGE>
TOMMY HILFIGER CORPORATION
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
As of March 31,
---------------
1997 1996
---- ----
ASSETS
Current assets
Cash and cash equivalents............ $109,908 $127,743
Accounts receivable.................. 79,984 68,402
Inventories.......................... 123,847 81,428
Other current assets................. 18,614 13,484
-------- -------
Total current assets............. 332,353 291,057
Property and equipment, at cost,
less accumulated depreciation
and amortization..................... 121,540 57,845
Other assets............................. 9,192 9,720
----- -----
Total Assets..................... $463,085 $358,622
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Short-term borrowings................ $5,980 $13,755
Accounts payable..................... 5,996 9,454
Accrued expenses and other
current liabilities.............. 49,710 29,409
-------- --------
Total current liabilities........ 61,686 52,618
Other liabilities........................ 2,425 2,877
Long-term debt........................... 1,510 1,789
Shareholders' equity
Preference Shares, $0.01 par
value-shares authorized
5,000,000; none issued........... -- --
Ordinary Shares, $0.01 par value-shares
authorized 50,000,000; issued and
outstanding 37,249,529 and
36,879,924 respectively.......... 372 369
Capital in excess of par value....... 165,032 155,294
Retained earnings.................... 232,015 145,633
Cumulative translation adjustment.... 45 42
-------- --------
Total shareholders' equity....... 397,464 301,338
Commitments and contingencies -------- --------
Total Liabilities and Shareholders'
Equity........................... $463,085 $358,622
======== ========
See accompanying Notes to Consolidated Financial Statements.
F-4<PAGE>
TOMMY HILFIGER CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
For The Fiscal Year Ended March 31,
-----------------------------------
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities
Net income.............................. $86,382 $61,500 $40,715
Adjustments to reconcile net
income to net cash provided
by operating activities
Depreciation and amortization....... 20,842 13,439 9,308
Deferred income taxes............... (4,428) (6,287) (845)
Stock compensation expense.......... -- 60 140
Realized and unrealized
losses on investments............... -- -- 473
Equity in loss (gain) of
equity investee..................... -- 143 (61)
Changes in operating assets
and liabilities (Increase)
decrease in assets
Accounts receivable............... (11,582) (17,917) (4,413)
Inventories....................... (42,419) (29,419) (17,195)
Other assets...................... (751) (5,805) 814
Increase (decrease) in
liabilities
Accounts payable.................. (3,458) 7,356 2,870
Accrued expenses and other
liabilities...................... 19,849 16,589 (4,009)
------ ------ -----
Net cash provided by
operating activities................ 64,435 39,659 27,797
------ ------ ------
Cash flows from investing
activities
Purchases of property and
equipment............................. (83,960) (28,694) (20,042)
Purchases of investments................ -- (101,138) (134,360)
Maturities and sales of
investments........................... -- 151,352 114,876
Other .................................. -- -- 277
------- ------- -------
Net cash (used in) provided
by investing activities............. (83,960) 21,520 (39,249)
------- ------ -------
Cash flows from financing
activities
Proceeds from the exercise
of employee stock options............. 3,929 13,027 5,115
Tax benefit from exercise
of stock options...................... 5,812 17,715 3,577
Acquisition of treasury stock........... -- -- (2,441)
Short-term bank (repayments)
borrowings............................ (7,775) 268 3,168
Payments on long-term debt.............. (279) (275) (277)
Other .................................. 3 12 (18)
------- ------- ------
Net cash provided by
financing activities................ 1,690 30,747 9,124
Net (decrease) increase
in cash............................. (17,835) 91,926 (2,328)
Cash and cash equivalents,
beginning of year....................... 127,743 35,817 38,145
------- ------ ------
Cash and cash equivalents, end
of year................................. $109,908 $127,743 $35,817
======== ======== =======
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
F-5<PAGE>
TOMMY HILFIGER CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
Unearned Cumulative Total
Capital in stock trans- share-
Ordinary excess of Retained compen- adjust- Treasury holders'
Shares par value earnings sation ment stock equity
-------- ---------- -------- -------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, MARCH 31, 1994.......... $346 $116,944 $44,900 ($490) $15 -- $161,715
Net income..................... 40,715 40,715
Ordinary shares
obtained for treasury,
118,576 shares............. ($2,441) (2,441)
Exercise of employee
stock options.................. 6 4,148 (1,482) 2,441 5,113
Tax benefit from exercise
of stock options............... 3,577 3,577
Increase in value of
proportionate interest
in subsidiary................ 190 190
Amortization of unearned stock
compensation................. 140 140
Translation adjustment......... 15 15
--- ------- ------ ---- ---- ---- -------
BALANCE, MARCH 31, 1995.......... 352 124,859 84,133 (350) 30 -- 209,024
Net income..................... 61,500 61,500
Exercise of employee
stock options................ 17 13,010 13,027
Tax benefit from
exercise of stock
options...................... 17,715 17,715
Amortization of
unearned stock
compensation................. (290) 350 60
Translation adjustment......... 12 12
--- ------- ------- ---- ---- ----- -------
BALANCE, MARCH 31, 1996.......... 369 155,294 145,633 -- 42 -- 301,338
Net income..................... 86,382 86,382
Exercise of employee
stock options................ 3 3,926 3,929
Tax benefit from exercise
of stock options............. 5,812 5,812
Translation adjustment......... 3 3
--- ------- ------- ---- ---- ---- --------
BALANCE, MARCH 31, 1997.......... $372 $165,032 $232,015 -- $ 45 -- $397,464
==== ======== ======== ==== ==== ==== ========
</TABLE>
See accompanying Notes to Consolidated Financial Statements
F-6<PAGE>
TOMMY HILFIGER CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Basis of Presentation
The consolidated financial statements include the
accounts of Tommy Hilfiger Corporation ("THC") and all
majority-owned subsidiaries, including Tommy Hilfiger U.S.A.,
Inc. ("TH USA"), Tommy Hilfiger Licensing, Inc. ("THLI"), Tommy
Hilfiger Retail, Inc. ("THR"), Tommy Hilfiger Flagship Stores,
Inc., Tommy Hilfiger (Eastern Hemisphere) Limited ("THEH"),
Tommy Hilfiger (HK) Limited ("THHK") and, through June 30,
1996, Tommy Hilfiger Nippon Co., Ltd. ("THN"), as well as THN's
49% interest in Tommy Hilfiger Japan Co., Ltd. ("TH Japan")
(collectively "the Company").
(b) Organization and Business
THC was incorporated as a British Virgin Islands
company in June 1992 and acts as a holding company for each of
the following operating subsidiaries.
TH USA designs and imports men's sportswear and
boyswear for wholesale distribution under the trademark license
agreement with THLI described below.
THLI licenses the use of the TOMMY HILFIGER
[R] trademarks to TH USA, THR and other affiliates and non
affiliates. These agreements grant the licensee exclusive rights
for use of the trademarks for specified products in specified
geographical areas.
THR commenced operations in April 1993 and as of
March 31, 1997 operated 55 retail stores.
THEH and THHK act as commissioned buying agents for
TH USA, THR and certain other of THLI's licensees.
THN was a 90% owned subsidiary and acted as a holding
company for the Company's interest in TH Japan, a joint venture
with Itochu, Ltd. TH Japan had licensed the rights to
manufacture and distribute the majority of the Company's
products in Japan from THLI and, in turn, sublicensed these
rights to various Japanese companies. The joint venture
terminated on June 30, 1996 and THN was dissolved in November
1996.
(c) Basis of Consolidation
All significant intercompany balances and
transactions have been eliminated. The Company accounted for
its interest in TH Japan on the equity basis.
(d) Cash, and Cash Equivalents and Investments
The Company considers all financial instruments
purchased with original maturities of three months or less to
be cash equivalents.
Short-term investments include investments with an
original maturity of greater than three months and a remaining
maturity of less than one year. These investments are carried
at market value and are classified as trading securities.
In determining realized gains and losses, the cost of
securities sold is based upon specific identification.
F-7<PAGE>
(e) Inventories
Inventories are valued at the lower of cost (weighted
average method) or market.
(f) Property and Equipment
Depreciation is calculated using the straight-line
method over the estimated useful lives of the assets, ranging
from three to twenty-five years. Leasehold improvements are
amortized using the straight-line method over the lesser of the
terms of the leases or the estimated useful lives of the
assets. The Company's share of the cost of constructing in-
store shop displays is capitalized and amortized using the
straight-line method over their estimated useful lives. These
costs are included in "Furniture and fixtures". Major
additions and betterments are capitalized and repairs and
maintenance are charged to operations in the period incurred.
(g) Income Taxes
The Company has recorded its provision for income
taxes under the liability method. Under this method, deferred
tax assets and liabilities are recognized based on differences
between the financial statement and tax bases of assets and
liabilities using presently enacted tax rates.
(h) Earnings Per Share and Share Equivalents
During fiscal 1995, the Company announced that its
Board of Directors approved a two-for-one stock split, effected
in the form of a 100% stock dividend, payable to shareholders
of record at the close of business on December 27, 1994.
Earnings per share and share equivalents for all periods
presented reflect the stock split.
(i) Revenues
Net revenues from wholesale product sales are
recognized upon shipment of products to customers. Allowances
for estimated returns and discounts are provided when sales are
recorded. Retail store revenues are recognized at the time of
sale. Licensing royalties and buying agency fees are
recognized as earned.
Net wholesale sales to major customers, based upon
their ownership at March 31, 1997, as a percentage of total net
wholesale sales for the three-year period ended March 31, 1997
were as follows:
Fiscal Year Ended March 31,
---------------------------
1997 1996 1995
---- ---- ----
Customer A 23% 22% 22%
Customer B 21% 21% 23%
Customer C 16% 14% 14%
F-8<PAGE>
(j) Foreign Currency Translation
The consolidated financial statements of the Company
are prepared in United States dollars as this is the currency
of the primary economic environment in which the Company
operates, and substantially all of its revenues are received
and expenses are disbursed in United States dollars. The
financial statements of non-United States entities are
translated into United States dollars in accordance with
Statement of Financial Accounting Standards ("SFAS") No. 52.
Under this translation method, adjustments resulting from
translating the financial statements of the non-United States
entities are recorded in shareholders' equity.
(k) Segment Information
The Company is engaged in principally one industry
segment, the design, importation and distribution of men's
sportswear and childrenswear.
Substantially all of the Company's net revenue and
income from operations are derived from, and identifiable
assets (other than the collateralized time deposits mentioned
in Note 4 which are located in Hong Kong) are located in, the
United States and, therefore, constitute foreign operations in
that the Company is incorporated in the British Virgin Islands.
(l) Fair Value of Financial Instruments
The fair values of short-term borrowings and long-
term debt approximate their carrying values as these financial
instruments bear interest at variable market rates. The fair
value of the Company's other monetary assets and liabilities
approximate carrying value due to the relatively short-term
nature of these items.
(m) Advertising Costs
Advertising costs are charged to operations when
incurred and totaled $19,651,000, $7,929,000 and $7,358,000
during the years ended March 31, 1997, 1996 and 1995,
respectively.
(n) Use of Estimates
The preparation of financial statements in conformity
with generally accepted accounting principles requires
management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from
those estimates.
NOTE 2 - ACCOUNTS RECEIVABLE
TH USA collects substantially all of its receivables
through a credit company pursuant to an agreement whereby the
credit company pays TH USA after the credit company receives
payment from the Company's customer. If the customer becomes
bankrupt or insolvent or the receivable becomes 120 days past
due, the credit company pays TH USA 50% of the outstanding
receivable. The credit company establishes maximum credit
limits for each customer account. Substantially all accounts
receivable are pledged as collateral under a bank financing
agreement.
F-9<PAGE>
NOTE 3 - INVENTORIES
Inventories are summarized as follows:
March 31,
---------
1997 1996
---- ----
Finished goods................. $122,237,000 $80,210,000
Raw materials.................. 1,610,000 1,218,000
---------- ----------
$123,847,000 $81,428,000
============ ===========
NOTE 4 - CASH EQUIVALENTS AND INVESTMENTS
Cash equivalents consist of collateralized time
deposits and have original maturities of less than three
months. As of March 31, 1997, cash equivalents in the
Consolidated Balance Sheet include $94,520,000 of time
deposits. At March 31, 1997, such investments are earning
interest at rates ranging from 5.16% to 5.31%.
Investment income is comprised of the following:
Fiscal Year Ended March 31,
---------------------------
1997 1996 1995
---- ---- ----
Interest income.......... $6,181,000 $5,712,000 $3,690,000
Net realized losses...... -- -- (473,000)
---------- ---------- ----------
Investment income........ $6,181,000 $5,712,000 $3,217,000
========== ========== ==========
NOTE 5 - PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
March 31,
---------
1997 1996
---- ----
Furniture and fixtures......... $88,507,000 $55,880,000
Leasehold improvements......... 27,924,000 19,239,000
Buildings and land............. 37,885,000 3,128,000
Machinery and equipment........ 16,263,000 8,372,000
------------ -----------
170,579,000 86,619,000
Less: accumulated depreciation
and amortization............. 49,039,000 28,774,000
------------ ------------
$121,540,000 $57,845,000
============ ============
NOTE 6 - SHORT-TERM BORROWINGS
In July 1996, the Company entered into an amended and
restated credit agreement (the "Credit Agreement") effective
April 1, 1996. The Credit Agreement, which expires in June
1999, provides for direct borrowings, bankers acceptances and
letters of credit of amounts ranging from $100,000,000 in
fiscal 1997 to $150,000,000 in fiscal 1999. Available
borrowings under the Credit Agreement are subject to the timed
increase of availability under the Credit Agreement and are
based upon eligible accounts receivable, inventory and open
letters of credit. As of March 31, 1997, $100,000,000 was
available for utilization under the Credit Agreement, of which
$66,822,000 had been used to open letters of credit.
Obligations under the Credit Agreement are
F-10<PAGE>
collateralized by substantially all the assets of the Company's
U.S. operations. Direct borrowings under the Credit Agreement,
which are limited to $60,000,000, accrue interest at varying
interest rates.
At March 31, 1997, total short-term borrowings of
$5,980,000 consisted of open letters of credit for inventory
purchased of $5,705,000 and the current portion of mortgage
debt payable of $275,000.
The Credit Agreement contains various covenants.
Among other matters, the Credit Agreement includes certain
restrictions upon capital expenditures, investments,
indebtedness, loans and advances and transactions with related
parties. In addition, the Credit Agreement prohibits certain
of the Company's operating subsidiaries, which are borrowers or
guarantors under the Credit Agreement, from paying dividends.
Because THC is a holding company, dividends or other advances
from its subsidiaries will be required to fund any cash
dividends to holders of Ordinary Shares. The Credit Agreement
also requires the maintenance of minimum tangible net worth and
interest coverage ratios.
The Company was in compliance with all covenants
under the Credit Agreement as of, and for the year ended, March
31, 1997.
NOTE 7 - ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
Accrued expenses and other current liabilities are
comprised of the following:
March 31,
---------
1997 1996
---- ----
Accrued compensation........... $15,734,000 $12,393,000
Accrued marketing.............. 6,369,000 1,576,000
Other.......................... 27,607,000 15,440,000
---------- ----------
$49,710,000 $29,409,000
=========== ===========
NOTE 8 - LONG-TERM DEBT
In connection with the purchase of real estate, THEH
obtained a ten-year, $2,746,000 mortgage. The debt, payable in
equal quarterly installments through August 2003, is secured by
the property and accrues interest at the Hong Kong prime
lending rate, which was 8.5% at March 31, 1997.
NOTE 9 - COMMITMENTS AND CONTINGENCIES
(a) Leases
The Company leases office, warehouse and showroom
space, retail stores and office equipment under operating
leases which expire not later than 2023. The Company
normalizes fixed escalations in rental expense under its
operating leases. Minimum annual rentals under non-cancelable
operating leases, excluding operating cost escalations and
contingent rental amounts based upon retail sales, are payable
as follows:
Fiscal Year Ending March 31,
----------------------------
1998...................... $8,753,000
1999...................... 10,635,000
2000...................... 10,440,000
2001...................... 8,402,000
2002...................... 7,169,000
Thereafter................ 50,687,000
F-11<PAGE>
Rent expense was $8,911,000, $5,768,000 and
$2,282,000 for the years ended March 31, 1997, 1996 and 1995,
respectively.
(b) Letters of credit
TH USA is contingently liable for unexpired bank
letters of credit at March 31, 1997 of $57,061,000 related to
commitments for the purchase of inventories and $4,056,000
related to leases.
(c) Commitments
At March 31, 1997, the Company had entered into
capital commitments primarily related to construction projects
of approximately $14,000,000.
(d) Legal matters
The Company is from time to time involved in routine
legal matters incidental to its business. In the opinion of
the Company, based on advice of counsel, the resolution of such
matters will not have a material effect on the financial
position or the results of operations of the Company.
NOTE 10 - INCOME TAXES
The components of the provision for income taxes are
as follows:
Fiscal Year Ended March 31,
---------------------------
1997 1996 1995
---- ---- ----
Current:
U.S. Federal.............. $39,276,000 $29,100,000 $18,516,000
State and Local........... 6,688,000 6,238,000 3,693,000
Non-U.S................... 3,330,000 1,849,000 1,378,000
----------- ----------- -----------
49,294,000 37,187,000 23,587,000
----------- ----------- -----------
Deferred:
U.S. Federal.............. (3,724,000) (4,940,000) (664,000)
State and Local........... (737,000) (1,347,000) (183,000)
Non-U.S................... 33,000 -- 2,000
----------- ----------- -----------
(44,428,000) (6,287,000) (845,000)
----------- ----------- -----------
Provision for income taxes... $44,866,000 $30,900,000 $22,742,000
=========== =========== ===========
Significant components of the Company's deferred tax
assets are summarized as follows:
March 31,
---------
1997 1996
---- ----
Deferred tax assets - current:
Inventory costs..................... $5,054,000 $3,457,000
Allowances for doubtful accounts
and sales discounts.............. 2,415,000 3,191,000
Accrued compensation............. 1,580,000 --
Other items, net.................... 3,070,000 1,464,000
----------- -----------
12,119,000 8,112,000
Deferred tax assets - non-current:
Depreciation and amortization....... 2,335,000 1,914,000
----------- -----------
2,335,000 1,914,000
----------- -----------
Total deferred tax assets.............. $14,454,000 $10,026,000
=========== ===========
F-12<PAGE>
The U.S. and non-U.S. components of income before
income taxes are as follows:
Fiscal Year Ended March 31,
---------------------------
1997 1996 1995
---- ---- ----
U.S....................... $104,671,000 $71,606,000 $51,789,000
Non-U.S................... 26,577,000 20,794,000 11,668,000
------------ ----------- -----------
$131,248,000 $92,400,000 $63,457,000
============ =========== ===========
The provision for income taxes differs from the
amounts computed by applying the applicable U.S. federal
statutory rates to income before taxes as follows:
<TABLE>
<CAPTION>
Fiscal Year Ended March 31,
---------------------------
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Provision for income taxes at the
U.S. federal statutory rate....... $45,937,000 $32,340,000 $22,210,000
State and local income taxes, net
of federal benefits............... 3,868,000 3,179,000 2,281,000
Non-U.S. income taxed at different
rates............................. (6,350,000) (5,612,000) (2,821,000)
Other................................ 1,411,000 993,000 1,072,000
.................................. ----------- ----------- -----------
Provision for income taxes.......... $44,866,000 $30,900,000 $22,742,000
=========== =========== ===========
</TABLE>
THC is not taxed on income in the British Virgin
Islands ("BVI") where it is incorporated. THC's subsidiaries
are subject to taxation in the jurisdictions in which they
operate.
Provision has not been made for taxes on
undistributed non-BVI, non-U.S. earnings of $121,642,000 at
March 31, 1997, as those earnings will continue to be
reinvested. As a result of various tax planning strategies
available to the Company, it is not practical to estimate the
amount of tax, if any, that might be payable on the eventual
remittance of such earnings.
NOTE 11 - RELATED PARTIES
Effective February 1, 1997, the Company entered into
a licensing agreement with Pepe Jeans London Corporation
("Pepe") to distribute the Company's men's and boys sportswear
(excluding jeanswear and jeans related apparel) throughout the
European market. Under this agreement, the licensee pays THLI
a royalty based on a percentage of the value of licensed
products sold by Pepe. Except with the approval of THLI, all
products sold by or through Pepe must be purchased through THEH
or TH USA pursuant to buying agency agreements. Under these
agreements, THEH and TH USA are paid a buying agency commission
based on a percentage of the cost of products sourced through
them. The distribution of products under this arrangement is
expected to begin in Fall 1997.
Effective June 30, 1996, the Company's joint venture
arrangement with TH Japan covering the Company's Japanese
operations expired. Effective July 1, 1996, the Company
entered into an exclusive license agreement for Japan with
Novel-ITC Licensing Limited ("NIL"), a related party. Under
the license agreement, NIL pays THLI a royalty based on a
percentage of the value of licensed products sold by NIL's
sublicensee. Except with the approval of THLI, all products
sold by or through NIL or its sublicensee must be purchased
through THEH or TH USA pursuant to buying agency agreements.
Under these agreements, THEH and TH USA are paid a buying
agency commission based on a percentage of the cost of products
sourced through them.
F-13<PAGE>
Pursuant to this new arrangement, royalties and commissions
totaled $2,745,000 during fiscal 1997. Pursuant to the prior
arrangement, royalties and commissions totaled $488,000 in
fiscal 1997, $1,939,000 in fiscal 1996 and $1,222,000 in fiscal
1995.
Effective October 1, 1995, the Company entered into a
license agreement with a related party, AIHL Investment Group
Limited (formerly SEL International Investments Corp.)
("AIHL"), the parent of Pepe, for the manufacture, sale and
distribution of men's, women's and girls' jeanswear and jeans
related apparel (which includes women's and girls' casualwear)
bearing the TOMMY HILFIGER [R] registered trademarks. Other
assets in the Consolidated Balance Sheet include a non-interest
bearing note receivable from AIHL in connection with this
transaction. The note, which has a face value of $5,000,000,
and is due on September 30, 2000, is recorded at its present
value of $3,735,000 at March 31, 1997 and $2,874,000 at March 31,
1996. Under this license agreement, the Company receives
royalties from subsidiaries of Pepe based upon a percentage of
net sales of licensed products. The fiscal 1997 and 1996 results
of operations include $9,963,000 and $1,915,000 of such
royalties. Net sales included in the Consolidated Statements of
Operations for these licensed products prior to this agreement
were $12,370,000 in fiscal 1996 and $9,104,000 in fiscal 1995.
In addition, in connection with this license, a subsidiary of
Pepe leases certain space at the Company's U.S. headquarters,
for which rent of $214,000 was received by the Company in fiscal
1997.
In June 1994, the Company granted a director of the
Company an option to purchase a 10% equity interest in THR in
connection with entering into an employment agreement with THR.
In July 1994, this option was exercised at $193,000, an
exercise price equal to 10% of the fair market value of THR as
determined by an independent appraisal. As a result of this
transaction, the value of the Company's proportionate interest
in THR increased by $190,000. During March 1996, in connection
with the termination of the director's employment, the Company
repurchased this equity interest for its fair value of
$1,800,000.
TH USA purchases finished goods in the ordinary
course of business from affiliated companies. Such purchases
amounted to $9,852,000, $10,970,000 and $12,092,000 during the
fiscal years ended March 31, 1997, 1996 and 1995, respectively.
In addition, contractors of the Company purchased raw materials
in the ordinary course of business from affiliates of the
Company. Such purchases amounted to $5,811,000, $7,910,000 and
$2,977,000 during the fiscal years ended March 31, 1997, 1996
and 1995, respectively.
THEH has entered into a buying agency agreement with
a Canadian licensee, in which one of the Company's directors
has an indirect beneficial ownership interest. Under this
agreement, THEH receives commissions based on a percentage of
the cost of goods sourced on behalf of the licensee. THLI
receives a royalty from the licensee based upon a percentage of
net sales of licensed products. Results of operations include
$2,378,000, $1,667,000 and $861,000 for the years ended March
31, 1997, 1996 and 1995, respectively, for commissions and
royalties received from this licensee.
TH USA sells merchandise in the ordinary course of
business to a retail store that is owned by a relative of a
director of the Company. Sales to this customer amounted to
approximately $435,000, $397,000 and $405,000 during the years
ended March 31, 1997, 1996 and 1995, respectively.
THEH has two consulting agreements with affiliates.
THEH paid fees of $875,000 in fiscal 1997 and $375,000 in each
of fiscal 1996 and 1995 to such affiliates.
F-14<PAGE>
TH USA had a consulting agreement with an affiliate.
The fees and related expenses under this consulting agreement
totaled $619,000 and $637,000 during the years ended March 31,
1996 and 1995, respectively.
During the year ended March 31, 1995, TH USA incurred
expenses of $1,000,000 for the sponsorship of an auto racing
team, in which an affiliate of a director owned an indirect
minority interest. The Company did not renew this sponsorship
subsequent to fiscal 1995.
Under the terms of an agreement with an affiliate,
THHK reimburses the affiliate for certain general and
administrative expenses incurred by the affiliate on behalf of
THHK. Payments made to the affiliate for the years ended March
31, 1997, 1996 and 1995 were $58,000, $114,000 and $87,000,
respectively.
NOTE 12 - PROFIT SHARING PLAN
TH USA maintains employee savings plans for eligible
U.S. employees. TH USA's contributions to the plans are
discretionary with matching contributions of up to 50% of
employee contributions of up to 5% of employee compensation.
For the years ended March 31, 1997, 1996 and 1995, the Company
made plan contributions of $345,000, $271,000 and $181,000,
respectively.
NOTE 13 - UNEARNED STOCK COMPENSATION
Unearned stock compensation associated with a former
key employee of TH USA was eliminated in 1996 in connection
with the termination of such employment. The balance of the
unearned stock compensation was recorded as a reduction of
Capital In Excess of Par Value.
NOTE 14 - STOCK OPTION PLANS
In September 1992, the Company and its subsidiaries
adopted stock option plans (the "Plans") authorizing the
issuance of an aggregate of up to 1,450,000 Ordinary Shares to
directors, officers and employees of the Company, as well as
1,520,000 Ordinary Shares reserved for issuance in connection
with an option granted to a former officer of the Company
pursuant to his employment agreement. The remaining
unexercised options granted under the terms of the officer's
employment agreement were exercised during fiscal 1996. In
December 1993, July 1995 and November 1996, a total of
2,500,000 Ordinary Shares of THC were authorized and reserved
for issuance to directors, officers and employees of the
Company, under the Plans. In August 1994, the Board of
Directors and shareholders of the Company approved the Non-
Employee Directors Stock Option Plan (the "Directors Option
Plan"). Under the Directors Option Plan, directors who are not
officers or employees of the Company are eligible to receive
stock option grants. The total number of Ordinary Shares for
which options may be granted under the Directors Option Plan
may not exceed 200,000 Ordinary Shares in the aggregate,
subject to certain adjustments.
F-15<PAGE>
Transactions involving the Plans and the Directors
Option Plan are summarized as follows:
Weighted Average
Exercise
Option Shares Price Per Share
-------------- ------------------
Outstanding as of April 1, 1994 3,110,500 $8.31
Granted........................... 256,000 $18.79
Exercised......................... (663,776) $7.67
Canceled.......................... (154,700) $15.92
-----------
Outstanding as of March 31, 1995 2,548,024 $9.37
Granted........................... 793,400 $29.50
Exercised......................... (1,654,724) $7.86
Canceled.......................... (85,100) $18.09
-----------
Outstanding as of March 31, 1996 1,601,600 $20.10
Granted........................... 708,300 $48.20
Exercised......................... (369,605) $10.64
Canceled.......................... (51,725) $39.56
-----------
Outstanding as of March 31, 1997 1,888,570 $31.26
===========
The following table summarizes information concerning currently
outstanding and exercisable options:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
----------------------------- --------------------
Weighted
Average Weighted Weighted
Remaining Average Average
Range Number Contractual Exercise Number Exercise
Exercise Prices Outstanding Life Price Exercisable Price
---------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$7.50-$15.00 328,320 5.70 $8.97 115,820 $7.95
$17.63-$22.00 300,450 7.60 $20.03 22,900 $19.76
$26.75-$30.25 590,800 8.48 $30.22 151,800 $30.25
$44.25-$58.50 669,000 9.22 $48.23 -- --
--------- ---- ------ ------- ------
$7.50-$58.50 1,888,570 8.11 $31.26 290,520 $20.53
========= ==== ====== ======= ======
</TABLE>
Options vest over periods ranging from 1-6 years.
The exercise price of all options granted under the Plans and
the Directors Option Plan is the market price on the dates of
grant.
F-16<PAGE>
The Company applies APB Opinion No. 25, "Accounting
for Stock Issued to Employees", and related interpretations in
accounting for its stock awards. Accordingly, no compensation
expense has been recognized for stock options. Had
compensation cost been recorded based upon the fair value at
the grant dates as an alternative provided by SFAS No. 123,
"Accounting for Stock Based Compensation", the Company's net
income and earnings per share would have been reduced by
approximately $2,998,000 and $.08, respectively, in 1997 and
$2,131,000 and $.06, respectively, in 1996. These amounts are
for disclosure purposes only and may not be representative of
future calculations since the estimated fair value of stock
options is amortized to expense over the vesting period, and
additional options may be granted in future years. The fair
values of options granted was estimated at $22.33 in 1997 and
$13.72 in 1996 on the dates of grant using the Black-Scholes
option-pricing model with the following weighted-average
assumptions for 1997 and 1996, respectively: volatility of 40%
and 42%; risk free interest rate of 6.1% and 6.3%; expected
life of 5.7 years and 5.6 years; and no future dividends.
NOTE 15 - STATEMENTS OF CASH FLOWS
Fiscal Year Ended March 31,
---------------------------
1997 1996 1995
---- ---- ----
Supplemental disclosure of cash
flow information:
Cash paid during the year:
Interest $ 930,000 $ 1,382,000 $ 515,000
=========== =========== ===========
Income taxes $34,559,000 $24,428,000 $21,665,000
=========== =========== ===========
NOTE 16 - QUARTERLY FINANCIAL DATA (UNAUDITED)
<TABLE>
<CAPTION>
First Second Third Fourth
Quarter Quarter Quarter Quarter
------- ------- ------- -------
1997
----
<S> <C> <C> <C> <C>
Net revenue.............. $124,129,000 $178,907,000 $188,199,000 $170,453,000
Gross profit............. 58,119,000 86,931,000 90,231,000 81,523,000
Net income............... 12,578,000 24,090,000 27,397,000 22,317,000
Earnings per share and
share equivalents........ .34 .63 .72 .59
</TABLE>
F-17<PAGE>
<TABLE>
<CAPTION>
1996
----
<S> <C> <C> <C> <C>
Net revenue.............. $89,522,000 $131,965,000 $130,501,000 $126,143,000
Gross profit............. 40,076,000 60,172,000 58,663,000 60,801,000
Net income............... 7,789,000 18,204,000 17,585,000 17,922,000
Earnings per share and
share equivalents....... .21 .49 .47 .48
</TABLE>
The quarterly financial data for the years ended
March 31, 1997 and 1996 are unaudited; however, in the opinion
of the Company, the interim data includes all adjustments,
consisting only of normal recurring adjustments necessary to
present such data fairly.
F-18<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
Not applicable
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
DIRECTORS AND EXECUTIVE OFFICERS
NAME AGE PRESENT POSITION
---- --- ----------------
Silas K.F. Chou 50 Chairman of the Board
Thomas J. Hilfiger 46 Honorary Chairman of the
Board and Principal Designer
Joel J. Horowitz 47 Chief Executive Officer,
President and Director
Benjamin M.T. Ng 34 Executive Vice President-
Corporate Finance, Assistant
Secretary and Director
Lawrence S. Stroll 37 Chief Executive Officer of
THHK and Director
Ronald K.Y. Chao 58 Director
Lester M.Y. Ma 50 Treasurer and Director
Joseph M. Adamko 64 Director
Clinton V. Silver 67 Director
Simon Murray 57 Director
Joel H. Newman 56 Executive Vice President-
Operations and Treasury
Lawrence T.S. Lok 40 Secretary
Silas K.F. Chou has been Chairman of the Board of Directors of
the Company since 1992. Mr. Chou also has served for more than
the past five years as an Executive Director of Novel
Enterprises Limited ("Novel Enterprises"). Mr. Chou was
appointed as Managing Director of Novel Enterprises in 1996.
Since 1992, Mr. Chou has been the Chairman of the board of
directors of Pepe Jeans London Corporation and its predecessor
(collectively, "Pepe") and Chief Executive Officer of AIHL
Investment Group Limited and its predecessor (collectively,
"AIHL").
Thomas J. Hilfiger has been a Director since 1992 and Honorary
Chairman of the Board of Directors of the Company since 1994.
Prior thereto, Mr. Hilfiger was Vice Chairman of the Board of
the Company and its predecessors since 1989, and President of
Tommy Hilfiger, Inc. ("THI") from 1982 to 1989. Mr. Hilfiger
has been designing clothes under the TOMMY HILFIGER [R]
trademark since 1984.
Joel J. Horowitz is Chief Executive Officer and President of
the Company. Mr. Horowitz has served as Chief Executive
Officer since 1994 and as President since 1995. From 1989 to
1994, Mr. Horowitz served as President and Chief Operating
Officer of the Company and its predecessors. Mr. Horowitz has
been a Director of the Company since 1992.
21<PAGE>
Benjamin M.T. Ng has been a Director and Executive Vice
President-Corporate Finance and Assistant Secretary of the
Company since 1992. From 1988 to 1991, Mr. Ng was employed in
the mergers and acquisitions department at Goldman, Sachs & Co.
Mr. Ng devotes a significant portion of his time to matters
related to AIHL and its affiliates other than the Company.
Lawrence S. Stroll has been a Director of the Company since
1992 and has served as Chief Executive Officer of THHK since
1993. Prior to 1993, he was active in the senior management of
THI from 1989 to 1990 and has served as an advisor to the
Company and its predecessors since 1989 through a consulting
arrangement. Mr. Stroll has also been Group Chief Executive
Officer of Pepe since 1993 and Chairman of the Board of AIHL
since 1992. Mr. Stroll's legal name is Lawrence S.
Strulovitch.
Ronald K.Y. Chao has been a Director of the Company since 1992.
In 1996, Mr. Chao was appointed as Vice Chairman of Novel
Enterprises. For more than five years prior thereto, Mr. Chao
served as the Managing Director of Novel Enterprises.
Lester M.Y. Ma has been a Director of the Company since 1992
and its Treasurer since 1996. Mr. Ma has been an Executive
Director and Group Chief Accountant of Novel Enterprises for
more than the past five years. Mr. Ma's legal name is Mang Yin
Ma.
Joseph M. Adamko has been a Director of the Company since 1993.
Since 1992, Mr. Adamko has been a director of Sterling Bancorp
and Vice Chairman and a director of Sterling National Bank.
Prior thereto, Mr. Adamko was employed by Manufacturers Hanover
Trust Company of New York in a variety of positions for over 30
years, including most recently as a Managing Director.
Clinton V. Silver has been a Director of the Company since
1994. Mr. Silver currently serves as a consultant to, and from
1991 until his retirement in 1994, as Deputy Chairman of, Marks
& Spencer plc ("Marks & Spencer"), an international retailer
based in London. Mr. Silver served as a director of Marks &
Spencer from 1974 to 1994 and as Joint Managing Director since
1990. Mr. Silver has also served as a director of VeriFone,
Inc. since January 1997.
Simon Murray has been a Director of the Company since April
1997. Since 1994, Mr. Murray has been the Executive Chairman
of Deutsche Bank AG for the Asia/Pacific region. From 1984 to
1993, Mr. Murray was the Group Managing Director of the
Hutchison Whampoa Group, a major Hong Kong-based conglomerate,
where he continues to be a member of the board of directors.
In addition, Mr. Murray is currently the Deputy Chairman of
China North Industries Investment Limited and a director of a
number of public companies in the Far East, including Cheung
Kong Holdings.
Joel H. Newman has been Executive Vice President-Operations and
Treasury of the Company since April 1997. Since 1993, Mr.
Newman has also held various senior operations and financial
positions with TH USA and currently serves as its Chief
Operating Officer. Prior to joining the Company, Mr. Newman
held various senior operations and financial positions with
major companies in the apparel wholesale and retail industries.
Lawrence T.S. Lok has been Secretary of the Company and Novel
Enterprises since December 1994. Mr. Lok has also been Deputy
Group Chief Accountant of Novel Enterprises since October 1991.
Ronald K.Y. Chao and Silas K.F. Chou are brothers.
22<PAGE>
TERMS OF DIRECTORS
At the first annual meeting of the shareholders held
on December 10, 1993, the directors were classified into three
classes, with one class elected initially for a one-year term,
one class elected initially for a two-year term and one class
elected initially for a three-year term. At each succeeding
annual meeting, the successors of the class of directors whose
terms expire at such meeting are elected for three-year terms.
The terms of Messrs. Ng, Stroll, Ma and Silver expire in 1997;
the terms of Messrs. Horowitz, Chao and Murray expire in 1998;
and the terms of Messrs. Chou, Hilfiger and Adamko expire in
1999.
SECTION 16(A) BENEFICIAL REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934,
as amended, requires the Company's officers and directors, and
persons who own more than ten percent of a registered class of
the Company's equity securities ("Reporting Persons") to file
reports of ownership and changes in ownership ("Section 16
Reports") with the Securities and Exchange Commission (the
"SEC") and the New York Stock Exchange. Reporting Persons are
required by the SEC to furnish the Company with copies of all
Section 16 Reports they file.
Based solely on its review of the copies of such
Section 16 Reports received by it, or written representations
received from Reporting Persons, all Section 16(a) filing
requirements applicable to the Company's Reporting Persons
during and with respect to the fiscal year ended March 31, 1997
have been complied with on a timely basis.
23<PAGE>
ITEM 11. EXECUTIVE COMPENSATION
EXECUTIVE COMPENSATION
The following table sets forth the compensation paid
and accrued by the Company and its subsidiaries for the fiscal
years ended March 31, 1997, 1996 and 1995 to the Company's
chief executive officer and the four other most highly
compensated executive officers (the "Named Executive
Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
----------------------- -------------
AWARDS
-------------
SECURITIES
FISCAL UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) STOCK OPTIONS (#) COMPENSATION ($)
--------------------------- ------ ---------- --------- ----------------- ----------------
<S> <C> <C> <C> <C> <C>
Joel J. Horowitz....................... 1997 473,000 7,174,000 -- 353(1)
Chief Executive Officer and 1996 430,000 5,016,000 -- 270
President 1995 400,000 3,312,000 -- 465
Thomas J. Hilfiger..................... 1997 8,498,223 4,500,000(2) -- 353(1)
Honorary Chairman and 1996 6,510,179 800,000 -- 270
Principal Designer 1995 4,699,414 -- -- 465
Silas K.F. Chou........................ 1997 750,000(3) 325,000 -- --
Chairman of the Board 1996 750,000(3) 325,000 -- --
1995 750,000(3) -- -- --
Lawrence S. Stroll..................... 1997 625,000(4) 325,000 -- --
Director; Chief Executive Officer 1996 625,000(4) 325,000 -- --
of THHK 1995 625,000(4) -- -- --
Benjamin M.T. Ng....................... 1997 250,000 211,375 5,000 4,044(5)
Director; Executive Vice 1996 150,000 288,625 150,000 4,093
President-Corporate Finance 1995 150,000 150,000 -- 2,789
<FN>
________
(1) Amount represents premiums paid by the Company for group term life
insurance on behalf of the Named Executive Officer.
(2) Of this amount, $3,500,000 will be payable on a deferred basis.
See "Certain Employment Agreements."
(3) 1997 amount includes 50% of the fees paid pursuant to a consulting
agreement between Tommy Hilfiger (Eastern Hemisphere) Limited
("THEH") and Fasco International, Inc. ("Fasco International"), a
subsidiary of Sportswear Holdings Limited ("Sportswear Holdings").
1996 and 1995 amounts include 50% of the fees paid pursuant to a
consulting agreement between TH USA and Falcon International, Inc.
("Falcon International"), a subsidiary of Sportswear Holdings.
See "Certain Relationships and Related Transactions."
(4) Includes (i) for 1997, 50% of the fees paid pursuant to a
consulting agreement between THEH and Fasco International, and for
1996 and 1995, 50% of the fees paid pursuant to a consulting
agreement between TH USA and Falcon International; and (ii) all of
the fees paid pursuant to a consulting agreement between THEH and
an affiliate of Mr. Stroll. See "Certain Relationships and
Related Transactions."
(5) Amount represents employer matching contribution under the Tommy
Hilfiger U.S.A. 401(k) Profit Sharing Plan of $3,750 and premiums
paid by the Company for group term life insurance on behalf of Mr.
Ng of $294.
</TABLE>
24<PAGE>
STOCK OPTION GRANTS
The following table sets forth information regarding
grants of stock options during fiscal year 1997 made to the
only Named Executive Officer who has received Company option
grants.
<TABLE>
<CAPTION>
STOCK OPTION GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS GRANT DATE VALUE (1)
----------------------------------------------------------------------------------------------- ---------------------
NUMBER OF PERCENT OF
SECURITIES TOTAL STOCK
UNDERLYING OPTIONS
STOCK GRANTED TO EXERCISE OF
OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION GRANT DATE
NAME GRANTED (#) FISCAL YEAR(2) ($/SH) DATE PRESENT VALUE($)
---- ----------- -------------- ----------- ---------- ----------------
<S> <C> <C> <C> <C> <C>
Benjamin M.T. Ng................ 5,000 0.71% 45.125 04/01/06 100,775
<FN>
________
(1) The fair value of these options on the date of grant was estimated
using the Black-Scholes option-pricing model with the following
assumptions: volatility of 40%; risk-free interest rate of 6%;
expected life of 5 years; and no future dividends. The dollar
amount in this column is not intended to forecast potential future
appreciation, if any, of the Company's Ordinary Shares.
(2) This percentage is calculated with respect to stock options
granted under the Plans (as defined below) during the last fiscal
year. The stock options granted to Mr. Ng during the last fiscal
year were non-qualified options granted pursuant to the Plans.
Such options become exercisable in 20% increments each April 30,
commencing April 30, 1997. See "Stock Option Plans".
</TABLE>
STOCK OPTION EXERCISES AND FISCAL YEAR-END OPTION VALUES
The following table sets forth information regarding
stock option exercises during fiscal year 1997 by the only
Named Executive Officer who has received Company option grants,
and the values of such officer's unexercised options as of
March 31, 1997.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL
YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBERS OF UNEXERCISED VALUE OF UNEXERCISED IN-THE-
SHARES STOCK OPTIONS AT MONEY STOCK OPTIONS AT
ACQUIRED ON VALUE FISCAL YEAR-END (#) FISCAL YEAR-END ($)
NAME EXERCISE (#) REALIZED ($) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
---- ------------ ------------ ------------------------- -------------------------
<S> <C> <C> <C> <C>
Benjamin M.T. Ng...... 30,000 1,455,825 150,070/5,000 3,303,133/35,625
</TABLE>
CERTAIN EMPLOYMENT AGREEMENTS
Subsidiaries of the Company had employment and
consulting agreements with Messrs. Hilfiger and Horowitz during
fiscal 1997.
The employment agreement with Tommy Hilfiger, the
Company's Honorary Chairman of the Board and Principal
Designer, provides for his employment as the designer of all
products carrying the TOMMY HILFIGER [R] trademark until his
death, disability or incompetence. Mr.
25<PAGE>
Hilfiger receives an annual base salary of $900,000, subject to
adjustments. If net sales of TH USA and its subsidiaries are
less than $48,333,333 in any year, Mr. Hilfiger's base salary
for such year is reduced by 1.5% of such shortfall, to not less
than $500,000. If net sales are greater than $48,333,333 in any
fiscal year, Mr. Hilfiger receives an additional payment equal
to 1.5% of such excess. If Mr. Hilfiger terminates his
employment without the consent of TH USA other than by reason
of his death, disability or incompetence, TH USA will have no
further obligations under the agreement. The employment
agreement provides that TH USA and its subsidiaries cannot
enter into any line of business without the consent of Mr.
Hilfiger if he shall reasonably determine that such line of
business would be detrimental to the TOMMY HILFIGER [R]
trademark.
The amended employment agreement with Mr. Horowitz
provides for his employment as Chief Executive Officer of the
Company and TH USA until March 14, 1999. The agreement
provided for an annual base salary in fiscal year 1997 of
$473,000. The base salary is subject to increase each year
thereafter by the average percentage increase for all employees
of TH USA. In addition, Mr. Horowitz is entitled to receive an
amount equal to 5 percent of the Company's earnings before
depreciation, interest on financing of fixed assets, non-
operating expenses and taxes ("operating earnings"), subject to
a minimum of $200,000 per year and a maximum of $777,000 per
year, which maximum has been reduced each year (from an
original level of $900,000) by the increase in his base salary;
provided, that if the Company's operating earnings are below $2
million in any year, TH USA is entitled to offset 10% of any
shortfall (up to $75,000) against such payments in future years
to the extent they would otherwise exceed $200,000.
Beginning in fiscal 1995, the Company became subject
to Section 162(m) of the Internal Revenue Code of 1986, as
amended (the "Code"), under which public companies are not
permitted to deduct annual compensation paid to certain
executive officers in excess of $1,000,000 per executive,
unless such excess is paid pursuant to an arrangement based
upon performance and approved by shareholders and provided that
the other requirements set forth in Section 162(m) and related
regulations are met. Payments required to be made pursuant to
the Company's aforementioned employment agreements with Messrs.
Hilfiger and Horowitz, which were entered into prior to the
effective date of Section 162(m), are not subject to such
restrictions.
On May 22, 1995, the Compensation Committee approved
and the Board of Directors adopted, and on July 28, 1995, the
shareholders approved, the Tommy Hilfiger U.S.A., Inc.
Supplemental Executive Incentive Compensation Plan (the "SEIC
Plan"), effective as of April 1, 1995 for each of the four
fiscal years ending March 31, 1999. The purpose of the SEIC
Plan is to provide a significant and flexible economic
opportunity to Mr. Horowitz, Chief Executive Officer and
President of the Company and Chief Executive Officer of TH USA,
in an effort to reward his contribution to the Company and its
subsidiaries. The SEIC Plan replaced the performance-based
compensation arrangement for Mr. Horowitz that was in effect
for fiscal year 1995. The SEIC Plan is administered by the
Compensation Committee and provides for a cash award to Mr.
Horowitz equal to 5 percent of the operating earnings (as
defined above) of the Company. Awards under the plan are
calculated and paid quarterly based on 3.75 percent of
operating earnings for the first three fiscal quarters, with
the remaining amount of the bonus (based on the 5 percent rate)
payable at the end of the fiscal year. The amount of the award
is reduced by the amount of any other bonuses based on the
operating earnings of the Company or any of its subsidiaries
granted to Mr. Horowitz. The 5 percent operating earnings
bonus payable under Mr. Horowitz's employment agreement is
credited against bonuses payable under the SEIC Plan. The SEIC
Plan does not contain any cap on the maximum amount of the
bonus payable thereunder. The SEIC Plan bonus payable to Mr.
Horowitz in respect of fiscal year 1997, net of the $777,000
26<PAGE>
bonus payable under his employment agreement, was $6,397,000.
While the Company believes that compensation payable pursuant
to the SEIC Plan will be deductible for federal income tax
purposes pursuant to Section 162(m), there can be no assurance
in this regard.
The employment agreements with Messrs. Hilfiger and
Horowitz also provide that such executives are eligible to
receive additional annual bonuses at the discretion of TH USA's
Compensation Committee if the TH USA Compensation Committee
determines that certain performance levels established by the
Company's Compensation Committee have been satisfied. If,
however, compensation is awarded based on an arrangement that
has not been approved by the shareholders, the Company would
not be allowed to deduct for tax purposes any payments in
excess of the $1,000,000 limitation. The Compensation
Committee approved discretionary bonuses of $4,500,000, of
which $3,500,000 was granted by the Company on a deferred basis
as described below (the "Deferred Bonus"), and $800,000 for Mr.
Hilfiger in fiscal years 1997 and 1996, respectively.
The Deferred Bonus (and any interest accrued thereon)
will be paid in annual installments on the last day of each
fiscal year of the Company (commencing with the fiscal year
ending March 31, 1998) in the largest possible amounts that can
be paid, after taking into account any base salary and other
compensation in that fiscal year which would be counted for
purposes of Section 162(m), and still be fully deductible
under such regulations. The unpaid portion of the Deferred
Bonus will accrue interest at a rate equal to TH USA's bank
borrowing rate. While the Company believes that such Deferred
Bonus payments will be deductible for federal income tax
purposes pursuant to Section 162(m), there can be no assurance
in this regard.
STOCK OPTION PLANS
Tommy Hilfiger U.S.A., Inc. and Tommy Hilfiger (Eastern
Hemisphere) Limited 1992 Stock Incentive Plans
In September 1992, the Company and its subsidiaries
adopted stock option plans (collectively, the "Plans")
authorizing the issuance of an aggregate of up to 1,450,000
Ordinary Shares to directors, officers and employees of the
Company and its subsidiaries, as well as 1,520,000 Ordinary
Shares that were reserved for issuance in connection with an
option granted to a former director and executive officer of
the Company pursuant to his employment agreement. Messrs.
Hilfiger, Horowitz, Chou, Chao and Stroll are not eligible for
grants under the Plans. In December 1993, July 1995 and
November 1996, the Company's shareholders approved amendments
to the Plans to increase by 1,000,000, 1,000,000 and 500,000,
respectively, the number of Ordinary Shares reserved for
issuance under the Plans.
The Plan for employees of TH USA has been
administered by the Compensation Committee of the Board of
Directors of TH USA and the Plan for employees of the Company's
non-United States subsidiaries have been administered by the
Company's Compensation Committee (collectively, the
"Compensation Committees"). The Compensation Committees
determine the employees to whom awards are granted, the number
of awards granted and the specific terms and conditions of each
grant, subject to the provisions of the Plans.
Under the Plans, awards may include stock options,
stock appreciation rights and restricted stock. An option or
right granted under the Plans must have an exercise price of
not less than market value at the date of grant, provided that
options granted prior to the offering must
27<PAGE>
have an exercise price of not less than the initial public
offering price. Options may be exercisable at such times, in
such amounts, in accordance with such terms and conditions, and
subject to such restrictions as are set forth in the option
agreement evidencing the grant of such options.
Adjustments in the number and kind of shares subject
to options granted under the Plans are made by the Compensation
Committees in the event of a merger, consolidation,
recapitalization, reclassification, stock split, warrants or
rights issuance, stock dividend or combination of shares. In
addition, the grants may provide for acceleration or immediate
vesting in the event of a change of control of the Company or
its subsidiaries.
Non-Employee Directors Stock Option Plan
In August 1994, the Board of Directors and
shareholders of the Company approved the Non-Employee Directors
Stock Option Plan (the "Directors Option Plan"). Under the
Directors Option Plan, directors who are not officers or
employees of the Company or any subsidiary of the Company
("Non-Employee Directors") are eligible to receive stock
options.
The Directors Option Plan is administered by the
Company's Compensation Committee consisting of not less than
two members of the Board, each of whom is a "disinterested
person" as that term is used in Rule 16b-3 promulgated under
the Exchange Act ("Rule 16b-3"). Subject to certain specific
limitations and restrictions set forth in the Directors Option
Plan, the Company Compensation Committee has full and final
authority to interpret the Directors Option Plan, to prescribe,
amend and rescind rules and regulations, if any, relating to
the Directors Option Plan and to make all determinations
necessary or advisable for the administration of the Directors
Option Plan. However, grants of stock options to participants
under the Plan and the amount, nature and timing of the grants
are not subject to the determination of the Committee.
The total number of Ordinary Shares for which options
may be granted under the Directors Option Plan may not exceed
200,000 shares while the Directors Option Plan is in effect,
subject to certain adjustments described in the Directors
Option Plan. Each Non-Employee Director receives an initial
stock option to purchase 10,000 Ordinary Shares at a price
equal to the fair market value at the time of the grant of the
Ordinary Shares subject to such stock option.
Prior to termination of the Directors Option Plan, on
the first to occur of either the April 1 or October 1 following
the first anniversary of each Non-Employee Director's date of
initial grant (the "First Annual Grant Date"), and on each
anniversary of such Non-Employee Director's First Annual Grant
Date, such Non-Employee Director will receive an additional
stock option to purchase 1,000 Ordinary Shares at a price equal
to the fair market value of the Ordinary Shares at the time of
the grant, provided such individual continues to be a Non-
Employee Director.
The term of each stock option will be 10 years unless
earlier terminated by termination of the director status of a
Non-Employee Director. The stock options will be exercisable
in equal installments over five years from the date of grant.
The stock options granted under the Directors Option Plan may
not be assigned or transferred except by will, applicable laws
of descent and distribution or pursuant to a qualified domestic
relations order.
The Board may amend, alter or discontinue the
Directors Option Plan, but no amendment, alteration or
discontinuation will be made which would (i) impair the rights
of an optionee under a stock option without the optionee's
consent, except such an amendment as would cause the Directors
Option Plan to qualify for the exemption provided by Rule 16b-3
or (ii) disqualify the
28<PAGE>
Directors Option Plan from the exemption provided by Rule
16b-3. In addition, (i) no amendment will be made without the
approval of the Company's shareholders to the extent such
approval is required by law or agreement, and (ii) the
Directors Option Plan will not be amended more often than once
every six months, other than to comport with changes in the
Code, the Employee Retirement Income Security Act of 1974, as
amended, or the rules thereunder.
All stock options granted by the Company are non-
qualified stock options for purposes of the Code. The grant of
non-qualified stock options does not result in any taxable
income to the participant. Upon the exercise of a non-
qualified stock option, the excess of the market value of the
shares acquired over their cost to the participant is taxable
to the participant as ordinary income. TH USA will generally
be entitled to a corresponding deduction at the time such
amounts are included in income by a TH USA Plan participant.
The participant's tax basis for the shares is their fair market
value at the time of exercise. Income realized on the exercise
of a non-qualified stock option is subject to federal and
(where applicable) state and local withholding taxes.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
From August 1994 through the end of the Company's
last fiscal year, the Compensation Committee consisted of Mr.
Adamko, who is the Chairman, and Mr. Silver. In April 1997,
Mr. Murray was appointed as an additional member of the
Compensation Committee.
During the Company's last fiscal year, Sportswear
Holdings was 50% owned by Novel Enterprises, a Hong Kong
corporation privately owned by members of the Chao family
(including Messrs. Silas K.F. Chou and Ronald K.Y. Chao), and
50% owned by Gadwal Limited, a Hong Kong corporation in which
Mr. Stroll has a indirect beneficial ownership interest
("Gadwal"). In January 1997, Novel Enterprises transferred its
ownership interest in Sportswear Holdings to a Hong Kong
corporation under common control with Novel Enterprises . AIHL
is owned by Sportswear Holdings, Mr. Hilfiger and Mr. Horowitz.
AIHL owns, indirectly through a subsidiary, substantially all
of the outstanding shares of Pepe. Novel Enterprises and its
affiliates also hold other interests in the apparel industry.
Mr. Chou, the Chairman of the Board of Directors of
the Company, is Chairman of the Board of Directors of Pepe.
Mr. Stroll, a Director of the Company and Chief Executive
Officer of THHK, is Group Chief Executive Officer and a
director of Pepe. Mr. Ng, an executive officer and Director of
the Company, is also a director of Pepe. Mr. Ma, an executive
officer and Director of the Company, and Mr. Chao, a Director
of the Company, are directors of certain subsidiaries of Pepe.
Messrs. Chou, Hilfiger, Stroll and Horowitz,
executive officers and Directors of the Company, are executive
officers and directors of AIHL. Mr. Ng, an executive officer
and Director of the Company, is an executive officer, and until
May 1997 was a Director, of AIHL.
Messrs. Chou and Stroll, executive officers and
Directors of the Company, are executive officers and directors
of Sportswear Holdings. Mr. Chao, a Director of the Company,
is a director of Sportswear Holdings.
Messrs. Chou and Ma, executive officers and Directors
of the Company, and Mr. Chao, a Director of the Company, are
executive officers and directors of both Novel Enterprises and
the transferee of Novel Enterprises' ownership interest in
Sportswear Holdings.
29<PAGE>
DIRECTOR COMPENSATION
Directors who are employees of the Company or its
subsidiaries receive no additional compensation for their
service on the Board and its Committees. All other Directors
of the Company receive a retainer of $25,000 per annum. Each
member of a Committee of the Board of Directors receives a
retainer of $5,000 per annum, and each Chairman of a Committee
of the Board of Directors receives an additional retainer of
$3,000 per annum. These Directors also receive $2,000 for
attendance at each meeting of the Board or a Committee.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The following table sets forth data as of June 2,
1997 concerning the beneficial ownership of Ordinary Shares by
(i) the persons known to the Company to beneficially own more
than five percent of the outstanding Ordinary Shares of the
Company, (ii) all directors and nominees and each Named
Executive Officer and (iii) all directors and executive
officers as a group as reported by each person.
AMOUNT
BENEFICIALLY PERCENT
OWNED OF CLASS(1)
------------ -----------
Provident Investment Counsel Inc.(2)
300 North Lake Avenue
Pasadena, CA 91101-4022.................. 3,948,582 10.5%
Pilgrim Baxter & Associates, Ltd.(3)
1255 Drummers Lane, Suite 300
Wayne, PA 19087-1590..................... 2,510,200 6.7%
DIRECTORS AND NAMED EXECUTIVE OFFICERS:
Silas K.F. Chou.......................... --- ---
Thomas J. Hilfiger....................... 5,000 *
Joel J. Horowitz......................... 5,000 *
Benjamin M.T. Ng......................... 151,070(4) *
Lawrence S. Stroll....................... --- ---
Ronald K.Y. Chao......................... 2,200(5) *
Lester M.Y. Ma........................... 2,200(5) *
Joseph M. Adamko......................... 3,600(6) *
Clinton V. Silver........................ 4,200(5) *
Simon Murray............................. --- ---
All directors and executive officers as
a group (12 persons)..................... 174,270 *
________
* Less than 1%.
(1) Shares outstanding includes the right to acquire
beneficial ownership of 450,930 Ordinary Shares pursuant
to currently exercisable stock options under Company stock
option plans. For purposes of this table, "currently
exercisable" stock options include options becoming vested
and exercisable within 60 days from June 2, 1997.
(2) Information based on Amendment to Schedule 13G dated
February 10, 1997 filed with the Securities and Exchange
Commission (the "SEC") by Provident Investment Counsel
Inc. ("Provident"). According to the Schedule 13G,
30<PAGE>
Provident, an investment adviser, has sole dispositive
power with respect to all of the shares and sole voting
power over 3,166,730 of the shares. Provident has no
power to vote or direct the voting of 781,852 of the
shares.
(3) Information based on Amendment to Schedule 13G dated
February 14, 1997 filed with the SEC by Pilgrim Baxter &
Associates, Ltd. ("Pilgrim"). According to the Schedule
13G, Pilgrim, an investment adviser, has sole dispositive
power and shared voting power over all of the shares.
(4) Issuable upon the exercise of currently exercisable stock
options under the Plans.
(5) Issuable upon the exercise of currently exercisable stock
options under the Directors Option Plan.
(6) Includes 2,200 Ordinary Shares issuable upon the exercise
of currently exercisable stock options under the Directors
Option Plan.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Certain relationships and transactions between the
Company and certain directors and officers of the Company and
certain of their affiliates are described below.
Effective February 1, 1997, the Company entered into
a licensing agreement with Pepe to distribute the Company's
men's and boys' sportswear (excluding jeanswear and jeans
related apparel) throughout the European market. Under this
agreement, the licensee pays THLI a royalty based on a
percentage of the value of licensed products sold by Pepe.
Except with the approval of THLI, all products sold by or
through Pepe must be purchased through THEH or TH USA pursuant
to buying agency agreements. Under these agreements, THEH and
TH USA are paid a buying agency commission based on a
percentage of the cost of products sourced through them. The
distribution of products under this arrangement is expected to
begin in Fall 1997.
Effective June 30, 1996, the Company's joint venture
arrangement with Tommy Hilfiger Japan Co., Ltd. ("TH Japan")
covering the Company's Japanese operations expired. Effective
July 1, 1996, the Company entered into an exclusive license
agreement for Japan with Novel-ITC Licensing Limited ("NIL"), a
company jointly controlled by Itochu Corporation, which was the
51% owner of TH Japan, and Novel Enterprises. Mr. Stroll
indirectly owns a 3.5% equity interest in NIL. Under the
license agreement, NIL pays THLI a royalty based on a
percentage of the value of licensed products sold by NIL's
sublicensee. Novel Enterprises and Messrs. Stroll, Hilfiger
and Horowitz indirectly own equity interests of 12.4%, 12.4%,
8.0% and 2.7%, respectively, in such sublicensee. Except with
the approval of THLI, all products sold by or through NIL or
its sublicensee must be purchased through THEH or TH USA
pursuant to buying agency agreements. Under these agreements,
THEH and TH USA are paid a buying agency commission based on a
percentage of the cost of products sourced through them.
Pursuant to this new arrangement, royalties and commissions
totaled $2,745,000 during fiscal year 1997. Pursuant to the
prior arrangement, royalties and commissions totaled $488,000
during fiscal year 1997, $1,939,000 during fiscal year 1996 and
$1,222,000 during fiscal year 1995.
Effective October 1, 1995, the Company entered into a
license agreement with a related party, AIHL (formerly SEL
International Investments Corp.), the parent of Pepe, for the
manufacture, sale and distribution of men's, women's and girl's
jeanswear and jeans related apparel (which includes women's and
girls' casual wear) bearing the TOMMY HILFIGER [R] registered
trademarks. The Company received a non-interest bearing note
receivable from AIHL in connection with this transaction. The
note which has a face value of $5,000,000, and is due on
September 30, 2000, is recorded at its present value of
$3,735,000. Under this license agreement, the Company receives
royalties from subsidiaries of Pepe based upon a percentage of
net sales of licensed products. The fiscal 1997 results of
operations include $9,963,000 of such royalties. Net sales
included in the Consolidated Statements of Operations for these
licensed products prior to this agreement were $12,370,000 in
fiscal 1996 and $9,104,000 in fiscal 1995. In addition, in
31<PAGE>
connection with this license, a subsidiary of Pepe leases
certain space at the Company's U.S. headquarters, for which
rent of $214,000 was received by the Company in fiscal 1997.
TH USA purchases finished goods in the ordinary
course of business from affiliates of Novel Enterprises. Such
purchases amounted to $9,852,000 during the fiscal year ended
March 31, 1997. In addition, contractors of the Company
purchase raw materials in the ordinary course of business from
affiliates of Novel Enterprises pursuant to the Company's
designation of such sources as acceptable suppliers. Such
purchases amounted to $5,811,000 during the fiscal year ended
March 31, 1997.
THEH has entered into a buying agency agreement with
Tommy Hilfiger Canada, Inc., a Canadian licensee, in which Mr.
Stroll, a Director of the Company and Chief Executive Officer
of THHK, has an indirect beneficial ownership interest. Under
this agreement, THEH receives commissions based on a percentage
of the cost of goods sourced on behalf of the licensee. THLI
receives a royalty from the licensee based upon a percentage of
net sales of licensed products. Results of operations include
$2,378,000 for the year ended March 31, 1997 for commissions
and royalties received from this licensee.
The Company sells merchandise in the ordinary course
of business to a retail store that is owned by Mr. Hilfiger's
sister. Sales to this customer amounted to approximately
$435,000 during the year ended March 31, 1997.
THEH has a consulting agreement with an affiliate,
Fasco International, pursuant to which THEH pays Fasco
International $500,000 per year, plus reimbursement of
expenses. The agreement has renewable one year terms. The
fees and related expenses under this consulting agreement
totaled $500,000 during the year ended March 31, 1997.
THEH has a consulting agreement with an affiliate of
Mr. Stroll. THEH paid fees of $375,000 in fiscal 1997 to such
affiliate.
Under the terms of an agreement with Novel
Enterprises, THHK reimburses Novel Enterprises for certain
general and administrative expenses incurred by it on behalf of
THHK. Payments made to Novel Enterprises for the year ended
March 31, 1997 were $58,000.
The law firm of Gursky & Associates, P.C., of which
Steven Gursky, Secretary of TH USA and Assistant Secretary of
the Company, is a member, provides legal services to the
Company and its subsidiaries. Payments to Gursky & Associates,
P.C., excluding reimbursement of expenses, were approximately
$1,301,000 in fiscal year 1997. Mr. Gursky is a cousin of Mr.
Horowitz, an executive officer and Director of the Company.
The Audit Committee of the Board of Directors
monitors and approves transactions between the Company and its
affiliates to seek to provide that such transactions are on
terms which are no less favorable as a whole to the Company
than could be obtained from unaffiliated parties. The Audit
Committee is composed of non-employee directors who are not
affiliated with Novel Enterprises, Gadwal, Sportswear Holdings,
AIHL or Pepe.
32<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS
ON FORM 8-K
Index to Financial Statements and Financial Statement
Schedules
(a) 1. Financial Statements
The following consolidated financial statements of
the Company are included in Item 8:
Consolidated Statements of Operations for the years
ended March 31, 1997, 1996 and 1995
Consolidated Balance Sheets as of March 31, 1997 and
1996
Consolidated Statements of Cash Flows for the years
ended March 31, 1997, 1996 and 1995
Consolidated Statements of Changes in Shareholders'
Equity for the years ended March 31, 1997, 1996 and
1995
Notes to Consolidated Financial Statements
(a) 2. Financial Statement Schedules
Form 10-K
Page
----
Schedule I - Condensed Financial
Information of Registrant 39
All other schedules have been omitted because of the
absence of the conditions under which they are required or
because the required information is included in the
Consolidated Financial Statements or Notes thereto.
(a) 3. Exhibits
Exhibit
Number Description
------- -----------
3.1 -- Memorandum of Association and Articles of
Association of the Company (previously
filed as Exhibit 3 with Registration No.
33-48587 and incorporated herein by
reference)
3.2 -- Amendment to Articles of Association
(previously filed as Exhibit 3 with
Registration No. 33-48587 and incorporated
herein by reference)
33<PAGE>
3.3 -- Amendment to Memorandum and Articles of
Association (previously filed as Exhibit
3.3 with Registration No. 33-88906 and
incorporated herein by reference)
4. -- Specimen certificate of the Company's
Ordinary Shares, par value $0.01 per share
(previously filed as Exhibit 4 with
Registration No. 33-48587 and incorporated
herein by reference)
10.1 -- Amended and Restated Credit Agreement,
dated as of July 11, 1996 (the "Credit
Agreement"), among Tommy Hilfiger U.S.A.,
Inc. and Tommy Hilfiger Retail, Inc., as
Borrowers, Tommy Hilfiger Corporation,
Tommy Hilfiger (Eastern Hemisphere)
Limited, Tommy Hilfiger (HK) Limited, Tommy
Hilfiger Licensing, Inc. and Tommy Hilfiger
Flagship Stores, Inc., as Guarantors, The
Chase Manhattan Bank, as Administrative
Agent, and the Lenders named therein
(previously filed as Exhibit 10(b) to the
Registrant's Quarterly Report on Form 10-Q
for the quarterly period ended June 30,
1996 and incorporated herein by reference)
10.2 -- First Amendment, dated as of October 18,
1996, to the Credit Agreement
10.3 -- Second Amendment, dated as of December 31,
1996, to the Credit Agreement
*10.4 -- Stock Option Plans of the Company and its
subsidiaries, as amended and restated
(previously filed as Exhibits 4.1 and 4.2
with Registration No. 333-20993)
*10.5 -- Tommy Hilfiger Corporation Non-Employee
Directors Stock Option Plan (previously
filed as Exhibit 10.3 with Registration No.
33-88906 and incorporated herein by
reference)
*10.6 -- Tommy Hilfiger U.S.A., Inc. Supplemental
Executive Incentive Compensation Plan
(previously filed as Exhibit 10(a) to the
Registrant's Quarterly Report on Form 10-Q
for the quarterly period ended September
30, 1995 and incorporated herein by
reference)
*10.7 -- Amended and Restated Employment Agreement,
dated as of June 30, 1992, between Tommy
Hilfiger U.S.A., Inc. and Tommy Hilfiger
(previously filed as Exhibit 10.3 with
Registration No. 33-48587 and incorporated
herein by reference)
*10.8 -- Amended and Restated Employment Agreement,
dated as of June 30, 1992, between Tommy
Hilfiger U.S.A., Inc. and Joel Horowitz
(previously filed as Exhibit 10.4 with
Registration No. 33-48587 and incorporated
herein by reference)
*10.9 -- Amendment, dated as of March 8, 1994, to
Amended and Restated Employment Agreement,
dated as of June 30, 1992, by and between
Tommy Hilfiger U.S.A., Inc. and Joel
Horowitz (previously filed as Exhibit 7 to
the Registrant's Annual Report on Form 20-F
for the fiscal year ended March 31, 1994
and incorporated herein by reference)
34<PAGE>
*10.10 -- Consulting Agreement, dated as of June 1,
1995, by and between Tommy Hilfiger U.S.A.,
Inc. and Jay M. Margolis (previously filed
as Exhibit 10.9 to the Registrant's Annual
Report on Form 10-K for the fiscal year
ended March 31, 1995 and incorporated
herein by reference)
*10.11 -- Termination Agreement, dated as of February
6, 1996, by and between Tommy Hilfiger
U.S.A., Inc. and Edwin H. Lewis (previously
filed as Exhibit 10.9 to the Registrant's
Annual Report on Form 10-K for the fiscal
year ended March 31, 1996 and incorporated
herein by reference)
*10.12 -- Termination Agreement, dated as of March
31, 1996, by and among Tommy Hilfiger
Retail, Inc., Tommy Hilfiger Corporation
and Robert C. Grayson (previously filed as
Exhibit 10.10 to the Registrant's Annual
Report on Form 10-K for the fiscal year
ended March 31, 1996 and incorporated
herein by reference)
*10.13 -- Stock Repurchase Agreement, dated as of
March 31, 1996, by and among Tommy Hilfiger
Retail, Inc., Tommy Hilfiger U.S.A., Inc.
and Robert C. Grayson (previously filed as
Exhibit 10.11 to the Registrant's Annual
Report on Form 10-K for the fiscal year
ended March 31, 1996 and incorporated
herein by reference)
10.14 -- Amended and Restated Factoring Agreement,
dated September 16, 1994 (the "Factoring
Agreement"), between Tommy Hilfiger U.S.A.,
Inc. and Century Business Credit
Corporation (previously filed as Exhibit
10.11 with Registration No. 33-88906 and
incorporated herein by reference)
10.15 -- Letter of amendment, dated April 3, 1995,
to the Factoring Agreement (previously
filed as Exhibit 10.11 to the Registrant's
Annual Report on Form 10-K for the fiscal
year ended March 31, 1995 and incorporated
herein by reference)
10.16 -- Letter of amendment, dated April 9, 1996,
to the Factoring Agreement (previously
filed as Exhibit 10.14 to the Registrant's
Annual Report on Form 10-K for the fiscal
year ended March 31, 1996 and incorporated
herein by reference)
10.17 -- Letter of Amendment, dated April 8, 1997,
to the Factoring Agreement
10.18 -- Warehouse Agreement, dated as of April 1,
1997, between Ridge Services, Inc. and
Tommy Hilfiger U.S.A., Inc.
10.19 -- Warehouse Agreement, dated as of April 1,
1997, between Ridge Services, Inc. and
Tommy Hilfiger Retail, Inc.
10.20 -- Contract of Sale, dated March 6, 1996,
between 2539 Realty Associates, as seller,
and Tommy Hilfiger U.S.A., Inc., as
purchaser, for 25 West 39th Street
(previously filed as Exhibit 10.20 to the
Registrant's Annual Report on Form 10-K for
the fiscal year ended March 31, 1996 and
incorporated herein by reference)
10.21 -- Lease, dated April 24, 1995, between
Forsgate Industrial Complex L.P. and Tommy
Hilfiger U.S.A., Inc. (previously filed as
Exhibit 10.25 to the Registrant's Annual
Report on Form 10-K for the fiscal year
ended March 31, 1995 and incorporated
herein by reference)
*10.22 -- Consulting Agreement, dated April 1, 1991,
between Polostro Limited and Tommy Hilfiger
(Eastern Hemisphere) Limited (previously
filed as Exhibit 10.13 with Registration
No. 33-48587 and incorporated herein by
reference)
*10.23 -- Amendment, dated as of April 1, 1993, to
Consulting Agreement, dated April 1, 1991,
between Polostro Limited and Tommy Hilfiger
(Eastern
35<PAGE>
Hemisphere) Limited (previously
filed as Exhibit 18 to the Registrant's
Annual Report on Form 20-F for the fiscal
year ended March 31, 1994 and incorporated
herein by reference)
*10.24 -- Consulting Agreement, dated April 1, 1996,
between Fasco International, Inc. and Tommy
Hilfiger (Eastern Hemisphere) Limited
(previously filed as Exhibit 10.25 to the
Registrant's Annual Report on Form 10-K for
the fiscal year ended March 31, 1996 and
incorporated herein by reference)
10.25 -- Trademark Agreement, dated June 30, 1992,
between Tommy J. Hilfiger and Tommy
Hilfiger, Inc. (previously filed as Exhibit
10.15 with Registration No. 33-48587 and
incorporated herein by reference)
10.26 -- United States License Agreement, dated
August 28, 1995, between Tommy Hilfiger
Licensing, Inc. and AIHL Investment Group
Limited (formerly SEL International
Investments Corp.) (portions of this
exhibit, which have been filed separately
with the Securities and Exchange
Commission, have been omitted pursuant to
an order of the Commission granting
confidential treatment) (previously filed
as Exhibit 10(d) to the Registrant's
Quarterly Report on Form 10-Q for the
quarterly period ended September 30, 1995
and incorporated herein by reference)
10.27 -- International License Agreement, dated
August 28, 1995, between Tommy Hilfiger
Licensing, Inc. and AIHL Investment Group
Limited (formerly SEL International
Investments Corp.) (portions of this
exhibit, which have been filed separately
with the Securities and Exchange
Commission, have been omitted pursuant to
an order of the Commission granting
confidential treatment) (previously filed
as Exhibit 10(e) to the Registrant's
Quarterly Report on Form 10-Q for the
quarterly period ended September 30, 1995
and incorporated herein by reference)
10.28 -- First Amendment, dated June 3, 1996, to
United States License Agreement, dated
August 28, 1995, between Tommy Hilfiger
Licensing, Inc. and AIHL Investment Group
Limited (formerly SEL International
Investments Corp.) (portions of this
exhibit, which have been filed separately
with the Securities and Exchange
Commission, have been omitted pursuant to
an order of the Commission granting
confidential treatment) (previously filed
as Exhibit 10.29 to Registrant's Annual
Report on Form 10-K/A No. 1 for the fiscal
year ended March 31, 1996 and incorporated
herein by reference)
10.29 -- First Amendment, dated June 3, 1996, to
International License Agreement, dated
August 28, 1995, between Tommy Hilfiger
Licensing, Inc. and AIHL Investment Group
Limited (formerly SEL International
Investments Corp.) (portions of this
exhibit, which have been filed separately
with the Securities and Exchange
Commission, have been omitted pursuant to
an order of the Commission granting
confidential treatment) (previously filed
as Exhibit 10.30 to Registrant's Annual
Report on Form 10-K/A No. 1 for the fiscal
year ended March 31, 1996 and incorporated
herein by reference)
10.30 -- License Agreement, dated June 24, 1996,
between Tommy Hilfiger Licensing, Inc. and
Novel-ITC Licensing Limited (portions of
this exhibit, which have been filed
separately with the Securities and Exchange
Commission, have been omitted pursuant to
an order of the Commission granting
confidential treatment) (previously filed
as Exhibit 10(a) to the Registrant's
Quarterly Report on Form 10-Q for the
quarterly period ended June 30, 1996 and
incorporated herein by reference)
36<PAGE>
10.31 -- License Agreement, dated as of February 1,
1997, between Tommy Hilfiger Licensing,
Inc. and Pepe Jeans London Corporation
(portions of this exhibit, which have been
filed separately with the Securities and
Exchange Commission, have been omitted
and are the subject of a request made to
the Commission for confidential treatment)
11. -- Statement re: Computation of Per Share
Earnings
21. -- Subsidiaries of the Company
23. -- Consent of Price Waterhouse LLP
24. -- Powers of Attorney
27. -- Financial Data Schedule
________
* Management contract or compensatory plan or arrangement.
(b) 1. Reports on Form 8-K
The Company did not file any Current Reports on Form
8-K during the three months ended March 31, 1997.
37<PAGE>
SIGNATURE
Pursuant to the requirements of Section 13 or 15(d)
of the Securities Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
TOMMY HILFIGER CORPORATION
/s/ Benjamin M.T. Ng
Benjamin M.T. Ng
Executive Vice President-Corporate
Finance
June 27, 1997
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following
persons on behalf of the registrant and in the capacities and
on the date indicated.
* Chairman of the Board June 27, 1997
(Silas K.F. Chou)
* Director and Honorary Chairman June 27, 1997
(Thomas J. Hilfiger)
*
(Joel J. Horowitz) Director, Chief Executive Officer June 27, 1997
and President (principal executive
officer)
* Director, Executive Vice President- June 27, 1997
(Benjamin M.T. Ng) Corporate Finance and Assistant
Secretary (principal financial
officer)
* Director June 27, 1997
(Lawrence S. Stroll)
* Director June 27, 1997
(Ronald K.Y. Chou)
* Director June 27, 1997
(Lester M.Y. Ma)
* Director June 27, 1997
(Joseph Adamko)
* Director June 27, 1997
(Clinton V. Silver)
Director June 27, 1997
(Simon Murray)
* Assistant Treasurer (principal June 27, 1997
(Steven A. Sorrillo) accounting officer)
*/s/ Benjamin M.T. Ng
Benjamin M.T. Ng
(Attorney-in-Fact)
38<PAGE>
SCHEDULE I
TOMMY HILFIGER CORPORATION
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
STATEMENTS OF OPERATIONS
1997 1996 1995
---- ---- ----
Equity in income of subsidiaries...... $131,248 $92,400 $63,457
Income before income taxes............ 131,248 92,400 63,457
Provision for income taxes............ 44,866 30,900 22,742
-------- ------- -------
Net income............................ $86,382 $61,500 $40,715
======== ======= =======
NOTE 1
Registrant is a British Virgin Islands holding
company formed in June 1992 in connection with the Company's
reorganization. See Notes 1(a) and 1(b) to the Consolidated
Financial Statements.
NOTE 2
Certain provisions of Tommy Hilfiger U.S.A., Inc.'s
credit facility with its commercial banks restrict the
distribution of income and assets of the Company. See Note 6
to the Consolidated Financial Statements.
39<PAGE>
SCHEDULE I
(CONTINUED)
TOMMY HILFIGER CORPORATION
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
March 31,
---------
1997 1996
---- ----
<S> <C> <C>
Investment in subsidiaries..................... $397,464 $301,338
-------- --------
Total Assets............................... $397,464 $301,338
======== ========
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY
Shareholders' equity
<S> <C> <C>
Preference shares, $0.01 par value-shares authorized
5,000,000; none issued................................
Common shares, $0.01 par value-shares authorized
50,000,000; issued and outstanding
37,249,529 and 36,879,924, respectively............... $372 $369
Capital in excess of par value........................ 165,032 155,294
Retained earnings..................................... 232,015 145,633
Cumulative translation adjustment..................... 45 42
-------- --------
Total shareholders' equity........................ 397,464 301,338
-------- --------
Total Liabilities and Shareholders' Equity.... $397,464 $301,338
======== ========
</TABLE>
40<PAGE>
SCHEDULE I
(continued)
TOMMY HILFIGER CORPORATION
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
For the Years Ended March 31,
-----------------------------
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities:
Net income.......................................... $131,248 $92,400 $63,457
Adjustments to reconcile net income cash from
operating activities:
Net equity in income of subsidiaries.......... (131,248) ($92,400) (63,457)
-------- -------- --------
Net cash provided by operating activities..... -- -- --
Cash flows from investing activities:
Investment in Tommy Hilfiger (Eastern Hemisphere)
Limited
Other .............................................. -- -- --
-------- -------- --------
Net cash used in investing activities............ -- -- --
-------- -------- --------
Cash flows from financing activities:
Net proceeds from public offering of ordinary shares... -- -- --
-------- -------- --------
Net cash provided by financing activities........ -- -- --
-------- -------- --------
Net increase in cash................................... -- -- --
Cash at beginning of year.............................. -- -- --
-------- -------- --------
Cash at end of year.................................... $ -- $ -- $ --
======== ======== ========
</TABLE>
41<PAGE>
EXHIBIT INDEX
Exhibit
Number Description
------- -----------
3.1 -- Memorandum of Association and Articles of
Association of the Company (previously
filed as Exhibit 3 with Registration No.
33-48587 and incorporated herein by
reference)
3.2 -- Amendment to Articles of Association
(previously filed as Exhibit 3 with
Registration No. 33-48587 and incorporated
herein by reference)
3.3 -- Amendment to Memorandum and Articles of
Association (previously filed as Exhibit
3.3 with Registration No. 33-88906 and
incorporated herein by reference)
4. -- Specimen certificate of the Company's
Ordinary Shares, par value $0.01 per share
(previously filed as Exhibit 4 with
Registration No. 33-48587 and incorporated
herein by reference)
10.1 -- Amended and Restated Credit Agreement,
dated as of July 11, 1996 (the "Credit
Agreement"), among Tommy Hilfiger U.S.A.,
Inc. and Tommy Hilfiger Retail, Inc., as
Borrowers, Tommy Hilfiger Corporation,
Tommy Hilfiger (Eastern Hemisphere)
Limited, Tommy Hilfiger (HK) Limited, Tommy
Hilfiger Licensing, Inc. and Tommy Hilfiger
Flagship Stores, Inc., as Guarantors, The
Chase Manhattan Bank, as Administrative
Agent, and the Lenders named therein
(previously filed as Exhibit 10(b) to the
Registrant's Quarterly Report on Form 10-Q
for the quarterly period ended June 30,
1996 and incorporated herein by reference)
10.2 -- First Amendment, dated as of October 18,
1996, to the Credit Agreement
10.3 -- Second Amendment, dated as of December 31,
1996, to the Credit Agreement
*10.4 -- Stock Option Plans of the Company and its
subsidiaries, as amended and restated
(previously filed as Exhibits 4.1 and 4.2
with Registration No. 333-20993)
*10.5 -- Tommy Hilfiger Corporation Non-Employee
Directors Stock Option Plan (previously
filed as Exhibit 10.3 with Registration No.
33-88906 and incorporated herein by
reference)
*10.6 -- Tommy Hilfiger U.S.A., Inc. Supplemental
Executive Incentive Compensation Plan
(previously filed as Exhibit 10(a) to the
Registrant's Quarterly Report on Form 10-Q
for the quarterly period ended September
30, 1995 and incorporated herein by
reference)
*10.7 -- Amended and Restated Employment Agreement,
dated as of June 30, 1992, between Tommy
Hilfiger U.S.A., Inc. and Tommy Hilfiger
(previously filed as Exhibit 10.3 with
Registration No. 33-48587 and incorporated
herein by reference)
*10.8 -- Amended and Restated Employment Agreement,
dated as of June 30, 1992, between Tommy
Hilfiger U.S.A., Inc. and Joel Horowitz
(previously filed as Exhibit 10.4 with
Registration No. 33-48587 and incorporated
herein by reference)
*10.9 -- Amendment, dated as of March 8, 1994, to
Amended and Restated Employment Agreement,
dated as of June 30, 1992, by and between
Tommy Hilfiger U.S.A., Inc. and Joel
Horowitz (previously filed as
42<PAGE>
Exhibit 7 to the Registrant's Annual Report
on Form 20-F for the fiscal year ended
March 31, 1994 and incorporated herein by
reference)
*10.10 -- Consulting Agreement, dated as of June 1,
1995, by and between Tommy Hilfiger U.S.A.,
Inc. and Jay M. Margolis (previously filed
as Exhibit 10.9 to the Registrant's Annual
Report on Form 10-K for the fiscal year
ended March 31, 1995 and incorporated
herein by reference)
*10.11 -- Termination Agreement, dated as of February
6, 1996, by and between Tommy Hilfiger
U.S.A., Inc. and Edwin H. Lewis (previously
filed as Exhibit 10.9 to the Registrant's
Annual Report on Form 10-K for the fiscal
year ended March 31, 1996 and incorporated
herein by reference)
*10.12 -- Termination Agreement, dated as of March
31, 1996, by and among Tommy Hilfiger
Retail, Inc., Tommy Hilfiger Corporation
and Robert C. Grayson (previously filed as
Exhibit 10.10 to the Registrant's Annual
Report on Form 10-K for the fiscal year
ended March 31, 1996 and incorporated
herein by reference)
*10.13 -- Stock Repurchase Agreement, dated as of
March 31, 1996, by and among Tommy Hilfiger
Retail, Inc., Tommy Hilfiger U.S.A., Inc.
and Robert C. Grayson (previously filed as
Exhibit 10.11 to the Registrant's Annual
Report on Form 10-K for the fiscal year
ended March 31, 1996 and incorporated
herein by reference)
10.14 -- Amended and Restated Factoring Agreement,
dated September 16, 1994 (the "Factoring
Agreement"), between Tommy Hilfiger U.S.A.,
Inc. and Century Business Credit
Corporation (previously filed as Exhibit
10.11 with Registration No. 33-88906 and
incorporated herein by reference)
10.15 -- Letter of amendment, dated April 3, 1995,
to the Factoring Agreement (previously
filed as Exhibit 10.11 to the Registrant's
Annual Report on Form 10-K for the fiscal
year ended March 31, 1995 and incorporated
herein by reference)
10.16 -- Letter of amendment, dated April 9, 1996,
to the Factoring Agreement (previously
filed as Exhibit 10.14 to the Registrant's
Annual Report on Form 10-K for the fiscal
year ended March 31, 1996 and incorporated
herein by reference)
10.17 -- Letter of Amendment, dated April 8, 1997,
to the Factoring Agreement
10.18 -- Warehouse Agreement, dated as of April 1,
1997, between Ridge Services, Inc. and
Tommy Hilfiger U.S.A., Inc.
10.19 -- Warehouse Agreement, dated as of April 1,
1997, between Ridge Services, Inc. and
Tommy Hilfiger Retail, Inc.
10.20 -- Contract of Sale, dated March 6, 1996,
between 2539 Realty Associates, as seller,
and Tommy Hilfiger U.S.A., Inc., as
purchaser, for 25 West 39th Street
(previously filed as Exhibit 10.20 to the
Registrant's Annual Report on Form 10-K for
the fiscal year ended March 31, 1996 and
incorporated herein by reference)
10.21 -- Lease, dated April 24, 1995, between
Forsgate Industrial Complex L.P. and Tommy
Hilfiger U.S.A., Inc. (previously filed as
Exhibit 10.25 to the Registrant's Annual
Report on Form 10-K for the fiscal year
ended March 31, 1995 and incorporated
herein by reference)
*10.22 -- Consulting Agreement, dated April 1, 1991,
between Polostro Limited and Tommy Hilfiger
(Eastern Hemisphere) Limited (previously
filed as Exhibit 10.13 with Registration
No. 33-48587 and incorporated herein by
reference)
*10.23 -- Amendment, dated as of April 1, 1993, to
Consulting Agreement, dated
43<PAGE>
April 1, 1991, between Polostro Limited and
Tommy Hilfiger (Eastern Hemisphere) Limited
(previously filed as Exhibit 18 to the
Registrant's Annual Report on Form 20-F for
the fiscal year ended March 31, 1994 and
incorporated herein by reference)
*10.24 -- Consulting Agreement, dated April 1, 1996,
between Fasco International, Inc. and Tommy
Hilfiger (Eastern Hemisphere) Limited
(previously filed as Exhibit 10.25 to the
Registrant's Annual Report on Form 10-K for
the fiscal year ended March 31, 1996 and
incorporated herein by reference)
10.25 -- Trademark Agreement, dated June 30, 1992,
between Tommy J. Hilfiger and Tommy
Hilfiger, Inc. (previously filed as Exhibit
10.15 with Registration No. 33-48587 and
incorporated herein by reference)
10.26 -- United States License Agreement, dated
August 28, 1995, between Tommy Hilfiger
Licensing, Inc. and AIHL Investment Group
Limited (formerly SEL International
Investments Corp.) (portions of this
exhibit, which have been filed separately
with the Securities and Exchange
Commission, have been omitted pursuant to
an order of the Commission granting
confidential treatment) (previously filed
as Exhibit 10(d) to the Registrant's
Quarterly Report on Form 10-Q for the
quarterly period ended September 30, 1995
and incorporated herein by reference)
10.27 -- International License Agreement, dated
August 28, 1995, between Tommy Hilfiger
Licensing, Inc. and AIHL Investment Group
Limited (formerly SEL International
Investments Corp.) (portions of this
exhibit, which have been filed separately
with the Securities and Exchange
Commission, have been omitted pursuant to
an order of the Commission granting
confidential treatment) (previously filed
as Exhibit 10(e) to the Registrant's
Quarterly Report on Form 10-Q for the
quarterly period ended September 30, 1995
and incorporated herein by reference)
10.28 -- First Amendment, dated June 3, 1996, to
United States License Agreement, dated
August 28, 1995, between Tommy Hilfiger
Licensing, Inc. and AIHL Investment Group
Limited (formerly SEL International
Investments Corp.) (portions of this
exhibit, which have been filed separately
with the Securities and Exchange
Commission, have been omitted pursuant to
an order of the Commission granting
confidential treatment) (previously filed
as Exhibit 10.29 to Registrant's Annual
Report on Form 10-K/A No. 1 for the fiscal
year ended March 31, 1996 and incorporated
herein by reference)
10.29 -- First Amendment, dated June 3, 1996, to
International License Agreement, dated
August 28, 1995, between Tommy Hilfiger
Licensing, Inc. and AIHL Investment Group
Limited (formerly SEL International
Investments Corp.) (portions of this
exhibit, which have been filed separately
with the Securities and Exchange
Commission, have been omitted pursuant to
an order of the Commission granting
confidential treatment) (previously filed
as Exhibit 10.30 to Registrant's Annual
Report on Form 10-K/A No. 1 for the fiscal
year ended March 31, 1996 and incorporated
herein by reference)
10.30 -- License Agreement, dated June 24, 1996,
between Tommy Hilfiger Licensing, Inc. and
Novel-ITC Licensing Limited (portions of
this exhibit, which have been filed
separately with the Securities and Exchange
Commission, have been omitted pursuant to
an order of the Commission granting
confidential treatment) (previously filed
as Exhibit 10(a) to the Registrant's
Quarterly Report on Form 10-Q for the
quarterly period
44<PAGE>
ended June 30, 1996 and
incorporated herein by reference)
10.31 -- License Agreement, dated as of February 1,
1997, between Tommy Hilfiger Licensing,
Inc. and Pepe Jeans London Corporation
(portions of this exhibit, which have been
filed separately with the Securities and
Exchange Commission, have been omitted
and are the subject of a request made to
the Commission for confidential treatment)
11. -- Statement re: Computation of Per Share
Earnings
21. -- Subsidiaries of the Company
23. -- Consent of Price Waterhouse LLP
24. -- Powers of Attorney
27. -- Financial Data Schedule
________
* Management contract or compensatory plan or arrangement.
45
EXHIBIT 10.2
FIRST AMENDMENT, dated as of October 18, 1996, to the
AMENDED AND RESTATED CREDIT AGREEMENT, dated as of July 11, 1996
(the "Credit Agreement"), among TOMMY HILFIGER U.S.A., INC., a
Delaware corporation ("THUSA"), TOMMY HILFIGER RETAIL, INC., a
Delaware corporation ("Retail"; THUSA and Retail individually, a
"Borrower" and collectively, the "Borrowers"), TOMMY HILFIGER
CORPORATION, a British Virgin Islands corporation ("THC"), TOMMY
HILFIGER (EASTERN HEMISPHERE) LIMITED, a British Virgin Islands
corporation ("THEH"), TOMMY HILFIGER (HK) LIMITED, a Hong Kong
corporation ("THHK"), TOMMY HILFIGER LICENSING, INC. a Delaware
corporation ("THL") and TOMMY HILFIGER FLAGSHIP STORES, INC., a
Delaware corporation (formerly known as Tommy Hilfiger
Womenswear, Inc.)("THFS"); (THC, THEH, THHK, THL and THFS
individually, a "Guarantor" and collectively, the "Guarantors"),
the several Lenders parties to the Credit Agreement (the
"Lenders") and THE CHASE MANHATTAN BANK (formerly Chemical Bank)
as administrative agent (in such capacity, the "Agent") for the
Lenders.
W I T N E S S E T H
WHEREAS, THUSA, Retail and each Guarantor have requested
that Subsection 6.3 of the Credit Agreement be amended and the
Agent and the Lenders are willing to amend Subsection 6.3 of the
Credit Agreement;
NOW, THEREFORE, in consideration of the premises and mutual
agreements contained herein, THUSA, Retail, each Guarantor, the
Agent and each Lender hereby agree that the Credit Agreement is
hereby amended as follows:
1. Definitions. Except as otherwise stated herein,
capitalized terms defined in the Credit Agreement and used herein
without definition shall have the respective meanings assigned to
them in the Credit Agreement.
2. Amendment to Subsection 6.3 of the Credit Agreement.
Subsection 6.3 of the Credit Agreement is hereby amended by
deleting the portion of such Subsection beginning with the word
"except" through the end of such Subsection and substituting the
following for such portion, to read in its entirety as follows:
"except (a) guarantees by indorsement of instruments for
deposit or collection in the ordinary course of business,
(b) guarantees by THUSA of the obligations of Retail under
leases of real property entered into by Retail in connection
with the operation of retail stores and outlet stores, (c)
guarantees by THC of obligations of THUSA or Retail, (d)
guarantees by a Guarantor (other than a Subsidiary of a
Borrower) of the obligations of another Guarantor or a
subsidiary of the Unrestricted Subsidiary; provided,
further, that such guarantees by THC shall not exceed in the
aggregate at any one time outstanding the principal amount
of $20,000,000 provided that, with respect to any lease
obligation, the principal amount of such obligation shall be
deemed to be the then current annual rent payment and (e)
guarantees of the Obligations."
3. Conditions of Effectiveness. This First Amendment shall
become effective, as of the date hereof, when the Agent shall
have received counterparts of this First Amendment executed each
Borrower, each Guarantor and the Majority Lenders.<PAGE>
4. Representations and Warranties. To induce the Lenders to
enter into this First Amendment, each Borrower and each Guarantor
hereby represents and warrants that:
(a) It has the power, authority and legal right to make
and deliver this First Amendment and to perform its
obligations under the Credit Agreement, as amended by this
First Amendment, without any notice, consent, approval or
authorization not already obtained, and it has taken all
necessary action to authorize the same.
(b) The making and delivery of this First Amendment,
and the performance of the Credit Agreement, as amended by
this First Amendment, do not violate any provision of law or
any regulation applicable to it, or its charter or by-laws,
or result in the breach of or constitute a default under or
require any consent under any indenture or other agreement
or instrument to which it is a party or by which it or any
of its property may be bound or affected. The Credit
Agreement, as amended by this First Amendment, constitutes
its legal, valid and binding obligation, enforceable against
it in accordance with its terms, except as enforceability
thereof may be limited by any applicable bankruptcy,
reorganization, insolvency, moratorium or other laws
affecting creditors' rights generally.
(c) The representations and warranties made by it in
the Credit Agreement are true and correct on and as of the
date on which this First Amendment becomes effective after
giving effect hereto.
(d) No Default or Event of Default has occurred and is
continuing under the Credit Agreement on and as of the date
on which this First Amendment becomes effective.
5. Reference to and Effect on the Credit Agreement and
other Loan Documents. (a) On and after the effective date of
this First Amendment each reference in the Credit Agreement to
"this Agreement", "hereunder", "hereof" or words of like import,
and each reference in any Note or any other Loan Document to the
"Credit Agreement", "thereunder", "thereof" or words of like
import referring to the Credit Agreement, shall mean and be a
reference to the Credit Agreement as amended hereby.
(b) Except as specifically amended hereby, the Credit
Agreement and each other Loan Document are and shall continue to
be in full force and effect and are hereby in all respects
ratified and confirmed.
(c) The execution, delivery and effectiveness of this First
Amendment shall not, except as expressly provided herein, operate
as a waiver of any right, power or remedy of any Lender under the
Credit Agreement, nor constitute a waiver of any provision of the
Credit Agreement.
6. Execution in Counterparts. This First Amendment may be
executed in any number of counterparts and by different parties
hereto in separate counterparts, each of which when so executed
and delivered shall be deemed to be an original and all of which
taken together shall constitute but one and the same agreement.
2<PAGE>
7. Governing Law. This First Amendment shall be governed by
and construed in accordance with the laws of the State of New
York.
IN WITNESS WHEREOF, the parties hereto have caused this
First Amendment to be executed by their respective officers
thereunto duly authorized, as of the date first above written.
TOMMY HILFIGER U.S.A., INC.
By: /s/ Joel Horowitz
Name: Joel Horowitz
Title: Chief Executive Officer
TOMMY HILFIGER RETAIL, INC.
By: /s/ Joel Horowitz
Name: Joel Horowitz
Title: President
TOMMY HILFIGER CORPORATION
By: /s/ Joel Horowitz
Name: Joel Horowitz
Title: President
3<PAGE>
TOMMY HILFIGER (EASTERN
HEMISPHERE) LIMITED
By: /s/ Steven R. Gursky
Name: Steven R. Gursky
Title: Assistant Secretary
TOMMY HILFIGER (HK) LIMITED
By: /s/ Steven R. Gursky
Name: Steven R. Gursky
Title: Assistant Secretary
TOMMY HILFIGER LICENSING, INC.
By: /s/ Steven R. Gursky
Name: Steven R. Gursky
Title: Secretary
TOMMY HILFIGER FLAGSHIP STORES,
INC. (f/k/a Tommy Hilfiger
Womenswear, Inc.)
By: /s/ Steven R. Gursky
Name: Steven R. Gursky
Title: Secretary
4<PAGE>
THE CHASE MANHATTAN BANK
(formerly Chemical Bank),
individually and as Agent
By: /s/ Paul Phelan
Paul Phelan
Vice President
BANK OF NEW YORK
By: /s/ George Glasser
Name: George Glasser
Title: VP
FLEET BANK, N.A.
(formerly NatWest Bank N.A.)
By: /s/ Catherine B. Lawrence
Name: Catherine B. Lawrence
Title: Vice President
ISRAEL DISCOUNT BANK OF NEW YORK
By: /s/ Lissa Baum
Name: Lissa Baum
Title: S.V.P.
By: /s/ Antonia Brocato
Name: Antonia Brocato
Title: A.V.P.
CENTURY BUSINESS CREDIT CORPORATION
By: /s/ Andrew H. Tananbaum
Name: Andrew H. Tananbaum
Title: President
5
EXHIBIT 10.3
SECOND AMENDMENT, dated as of December 31, 1996, to the
AMENDED AND RESTATED CREDIT AGREEMENT, dated as of July 11,
1996 (as heretofore amended, the "Credit Agreement"), among
TOMMY HILFIGER U.S.A., INC., a Delaware corporation ("THUSA"),
TOMMY HILFIGER RETAIL, INC., a Delaware corporation ("Retail";
THUSA and Retail individually, a "Borrower" and collectively,
the "Borrowers"), TOMMY HILFIGER CORPORATION, a British Virgin
Islands corporation ("THC"), TOMMY HILFIGER (EASTERN
HEMISPHERE) LIMITED, a British Virgin Islands corporation
("THEH"), TOMMY HILFIGER (HK) LIMITED, a Hong Kong corporation
("THHK"), TOMMY HILFIGER LICENSING, INC. a Delaware corporation
("THL") and TOMMY HILFIGER FLAGSHIP STORES, INC., a Delaware
corporation (formerly known as Tommy Hilfiger Womenswear,
Inc.) ("THFS"); (THC, THEH, THHK, THL and THFS individually, a
"Guarantor" and collectively, the "Guarantors"), the several
Lenders parties to the Credit Agreement (the "Lenders") and THE
CHASE MANHATTAN BANK (formerly Chemical Bank) as administrative
agent (in such capacity, the "Agent") for the Lenders.
W I T N E S S E T H
WHEREAS, THUSA, Retail and each Guarantor have requested
that Subsection 6.4 of the Credit Agreement be amended and the
Agent and the Lenders are willing to amend Subsection 6.4 of
the Credit Agreement;
NOW, THEREFORE, in consideration of the premises and
mutual agreements contained herein, THUSA, Retail, each
Guarantor, the Agent and each Lender hereby agree that the
Credit Agreement is hereby amended as follows:
1. Definitions. Except as otherwise stated herein,
capitalized terms defined in the Credit Agreement and used
herein without definition shall have the respective meanings
assigned to them in the Credit Agreement.
2. Amendment to Subsection 6.4 of the Credit Agreement.
Subsection 6.4 of the Credit Agreement is hereby amended by
replacing the numbers $27,500,000 and $75,000,000 therein with
the numbers $35,000,000 and $100,000,000, respectively.
3. Conditions of Effectiveness. This Second Amendment
shall become effective, as of the date hereof, when the Agent
shall have received counterparts of this Second Amendment
executed each Borrower, each Guarantor and the Majority
Lenders.
4. Representations and Warranties. To induce the Lenders
to enter into this Second Amendment, each Borrower and each
Guarantor hereby represents and warrants that:
(a) It has the power, authority and legal right to
make and deliver this Second Amendment and to perform its
obligations under the Credit Agreement, as amended by this
Second Amendment, without any notice, consent, approval or
authorization not already obtained, and it has taken all
necessary action to authorize the same.
(b) The making and delivery of this Second Amendment,
and the performance of the Credit Agreement, as amended by
this Second Amendment, do not violate any provision of law
or any regulation applicable to it, or its charter or by-
laws, or result in the breach of or constitute a default
under or require any consent under any indenture or other<PAGE>
agreement or instrument to which it is a party or by which
it or any of its property may be bound or affected. The
Credit Agreement, as amended by this Second Amendment,
constitutes its legal, valid and binding obligation,
enforceable against it in accordance with its terms,
except as enforceability thereof may be limited by any
applicable bankruptcy, reorganization, insolvency,
moratorium or other laws affecting creditors' rights
generally.
(c) The representations and warranties made by it in
the Credit Agreement are true and correct on and as of the
date on which this Second Amendment becomes effective
after giving effect hereto.
(d) No Default or Event of Default has occurred and
is continuing under the Credit Agreement on and as of the
date on which this Second Amendment becomes effective.
5. Reference to and Effect on the Credit Agreement and
other Loan Documents. (a) On and after the effective date of
this Second Amendment each reference in the Credit Agreement to
"this Agreement", "hereunder", "hereof" or words of like
import, and each reference in any Note or any other Loan
Document to the "Credit Agreement", "thereunder", "thereof" or
words of like import referring to the Credit Agreement, shall
mean and be a reference to the Credit Agreement as amended
hereby.
(b) Except as specifically amended hereby, the Credit
Agreement and each other Loan Document are and shall continue
to be in full force and effect and are hereby in all respects
ratified and confirmed.
(c) The execution, delivery and effectiveness of this
Second Amendment shall not, except as expressly provided
herein, operate as a waiver of any right, power or remedy of
any Lender under the Credit Agreement, nor constitute a waiver
of any provision of the Credit Agreement.
6. Execution in Counterparts. This Second Amendment may
be executed in any number of counterparts and by different
parties hereto in separate counterparts, each of which when so
executed and delivered shall be deemed to be an original and
all of which taken together shall constitute but one and the
same agreement.
7. Governing Law. This Second Amendment shall be
governed by and construed in accordance with the laws of the
State of New York.
2<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused
this Second Amendment to be executed by their respective
officers thereunto duly authorized, as of the date first above
written.
TOMMY HILFIGER U.S.A., INC.
By: /s/ Joel Horowitz
Name: Joel Horowitz
Title: Chief Executive Officer
TOMMY HILFIGER RETAIL, INC.
By: /s/ Joel Horowitz
Name: Joel Horowitz
Title: President
TOMMY HILFIGER CORPORATION
By: /s/ Joel Horowitz
Name: Joel Horowitz
Title: President
TOMMY HILFIGER (EASTERN
HEMISPHERE) LIMITED
By: /s/ Joel Horowitz
Name: Joel Horowitz
Title: President
TOMMY HILFIGER (HK) LIMITED
By: /s/ Joel Horowitz
Name: Joel Horowitz
Title: President
TOMMY HILFIGER LICENSING, INC.
By: /s/ Joel Horowitz
Name: Joel Horowitz
Title: President
3<PAGE>
TOMMY HILFIGER FLAGSHIP STORES,
INC. (f/k/a Tommy Hilfiger
Womenswear, Inc.)
By: /s/ Joel Horowitz
Name: Joel Horowitz
Title: President
THE CHASE MANHATTAN BANK
(formerly Chemical Bank),
individually and as Agent
By: /s/ Paul Phelan
Paul Phelan
Vice President
BANK OF NEW YORK
By: /s/ Allison J. White
Name: Allison J. White
Title: Vice President
FLEET BANK, N.A.
(formerly NatWest Bank N.A.)
By: /s/ Bruce Wicks
Name: Bruce Wicks
Title: Vice President
ISRAEL DISCOUNT BANK OF NEW YORK
By: /s/ Howard Weinberg
Name: Howard Weinberg
Title: First Vice President
By: /s/ Antonia Brocato
Name: Antonia Brocato
Title: Assistant Vice
President
4<PAGE>
CENTURY BUSINESS CREDIT CORPORATION
By: /s/ Andrew H. Tananbaum
Name: Andrew H. Tananbaum
Title: President
PNC BANK, NATIONAL ASSOCIATION
By: /s/ Michael Nardo
Name: Michael Nardo
Title: Vice President
SUMMIT BANK
By: /s/ Lawrence F. Zema
Name: Lawrence F. Zema
Title: Vice President &
Regional Manager
Large Corporate Group
Summit Bank
5
EXHIBIT 10.17
CENTURY BUSINESS CREDIT CORPORATION
119 West 40th Street,
New York, N.Y. 10018-2566
(212) 703-3500 - Fax (212) 703-3520/3590/3639
April 8, 1997
Mr. Joel Newman
Tommy Hilfiger U.S.A., Inc.
25 West 39th Street
New York, NY 10018
RE: FACTORING AGREEMENT
Gentlemen:
Reference is hereby made to the Factoring Agreement between us
dated September 16, 1994, as amended. This letter will confirm
the terms of a further amendment of such Factoring Agreement as
follows:
A. Paragraph 7 is amended to read in its entirety as
follows: "For your services hereunder with respect
to our sales for each year beginning, April 1, 1997,
you shall receive a commission equal to thirty-five
one hundredths of one percent (.35%) of the net face
value amount of each credit approved Receivable less
selling discounts which shall be chargeable to our
account with you on the last day of each month.
B. Paragraph 13 is amended to substitute "2001" for
"2000".
C. Except as expressly specified provided herein, all of
the representations, warranties, terms, covenants and
conditions of the Factoring Agreement as previously
and hereby amended shall remain in full force and ef-
fect. The amendments set forth herein shall be lim-
ited precisely as set forth herein and shall not be
deemed as amendment of, consent to or modification of
any other term of provision of the Factoring Agree-
ment.<PAGE>
Please confirm you agreement to the foregoing, where indicated
below.
Very truly yours,
CENTURY BUSINESS CREDIT CORPORATION
/s/ David L. Finkelstein
David L. Finkelstein
Senior Executive Vice President
Accepted and Agreed to:
New York, NY
April 8, 1997
TOMMY HILFIGER U.S.A., INC.
By: /s/ Joel H. Newman
Title: Exec. VP Fin. & Oper.
EXHIBIT 10.18
AGREEMENT
AGREEMENT made as of the 1st day of April, 1997, by and
between RIDGE SERVICES INC. (hereinafter "Ridge"), whose address
is 112 Truman Drive, Edison, New Jersey 08818 and TOMMY HILFIGER
U.S.A., INC. (hereinafter "THUSA"), whose address is 18 Thatcher
Road, Dayton, New Jersey 08810.
WHEREAS, Ridge is in the business of providing all attendant
"Pick & Pack" services incidental to the movement of goods within
and without its storage facilities, and
WHEREAS, THUSA desires to have Ridge provide "Pick & Pack"
services at THUSA's warehouse facility at 18 Thatcher Road,
Dayton, New Jersey 08810 (the "Warehouse").
NOW, THEREFORE, in consideration of the mutual covenants
herein contained, THUSA and Ridge agree as follows:
1. Term. This Agreement shall commence as of April 1, 1997
and shall continue for a period of six (6) months to September
30, 1997 (the "Term"). The Term shall be automatically renewed
from month to month thereafter unless terminated by either party
on sixty (60) days written notice to the other.
2. Charges. For an annual throughput of up to 32,000,000
units, the charges (the "Charges") for the Services described in
Paragraph 3 below shall be as follows:
(a) $0.125 per unit - Inbound
(b) $0.14 per unit - Outbound
(c) $12.75 labor rate per hour for Excluded Services
(d) $0.06 per unit for transfers
Overtime may only be charged to THUSA if the same has been
specifically authorized by THUSA in writing in each instance.
THUSA will not pay for any overtime occasioned as a result of
Ridge's inefficiencies. THUSA will pay for the excess cost only
of overtime above Ridge's regular rate (currently $6.38/hour).
3. Scope of Services. In consideration for the Charges
paid by THUSA to Ridge, Ridge agrees to promptly provide the
following services (the "Services"):
(a) All inbound and outbound handling (including scanning)
(b) Receiving, sorting, and shelving merchandise into stock
area
(c) Selection by order format
(d) 100% verification process
(e) UPS processing
(f) Expediting of daily transactions by clerical personnel.
<PAGE>
(g) Providing cartons and tape
(h) Outbound trucking to consolidators
(i) Adhering to cleanliness standards maintained by THUSA,
including proper and timely disposal of waste and restacking and
resorting of merchandise.
4. Excluded Services. The following shall specifically not
be included in the Services:
(a) Cycle Counting
(b) Affixing Bar Codes
(c) Physical Inventories
(d) All space costs
(e) Outside storage (if required)
(f) Providing pallets
5. Ridge Personnel. Ridge shall employ sufficient
personnel in order to provide a monthly average of the man-hours
described below in the performance of the Services:
JOB DESCRIPTION NO. OF HOURS PER DAY
Managers 8
Laborers 1400
Machine Operator/Cycle Counter 8
Supervisors 136
Clericals 24
The hours described above shall be organized by Ridge to
provide the Services to THUSA in light of the varied ebb and flow
of merchandise receipts and shipping. Ridge shall employ
adequate staffing from 8:00 A.M. - 8:00 P.M. on weekdays and on
Saturdays as needed. Staffing in satisfaction of the
requirements of this paragraph shall not require the payment of
any overtime charges by THUSA. Ridge shall provide THUSA with a
monthly report of man-hours to be provided hereunder. Such
report shall be delivered to THUSA within ten (10) days of the
end of each month. THUSA shall have the right to audit Ridge's
records of such man-hours.
6. Quality Assurance. THUSA shall have the right to issue
and periodically update quality assurance, performance standards
and rules and regulations for Ridge's performance of this
Agreement so as to ensure customer satisfaction and efficient and
appropriate operation of the Warehouse.
7. Independent Contractor. Nothing in this Agreement is
intended nor shall be construed to create any relationship
between THUSA and Ridge other than that of independent
contractors and this Agreement shall not be deemed to constitute
THUSA and Ridge as partners, joint venturers or joint employers.
8. Employees. Neither Ridge nor the individuals it engages
to perform the services required
-2-
<PAGE>
of Ridge hereunder are employees of THUSA; all such individuals
shall for all purposes be Ridge's employees, and Ridge shall have
the sole authority to hire, fire, direct, control, discipline,
reward, evaluate, schedule, supervise, promote, suspend and/or
terminate Ridge's employees. In addition, Ridge shall be solely
responsible for the acts of its employees, whether of commission
or omission, and for payment of all salaries, withholding tax
deductions, benefits, unemployment compensation, workers compensation
and all other charges and liabilities arising out of the
employer-employee relationship, including, without limitation,
liabilities under any civil rights laws, wage and hour laws, equal
employment opportunity acts, any union, welfare and pension
contributions and the expense of prosecuting, defending or complying
with the award in any labor arbitration proceeding.
9. Labor Disturbance. If during the term of this Agreement
there shall occur any labor disturbance involving Ridge's
employees, whether or not such disturbance is within Ridge's
control, which involves picketing of or handbilling at any THUSA
facility or a strike or boycott against THUSA or any of its
facilities, THUSA may give Ridge written notice of objection to
the labor disturbance, and if such disturbance is not wholly
discontinued within forty-eight (48) hours after Ridge's receipt
of such notice, then, at THUSA's sole option, this Agreement and
Ridge's rights hereunder shall terminate immediately upon the
giving of such notice of termination, but THUSA shall remain
liable for any amounts due to Ridge with respect to work
performed prior to such termination.
10. Notice of Loss. Ridge shall give THUSA immediate
notice of any loss or shortage of THUSA merchandise. Ridge
agrees to cooperate with all respects with any investigation
conducted by THUSA, its agents or insurance company arising from
any losses.
11. Insurance. Ridge shall, at its cost, keep in force the
following insurance:
(a) public liability insurance for the mutual benefit of
Ridge and THUSA against claims for bodily injury, death or
property damage occurring in connection with the performance of
Ridge's obligations hereunder with limits of not less than
$10,000,000/$10,000,000/$1,000,000.
(b) such employment and other insurance in such reasonable
amounts against other insurable hazards which at the time are
reasonably available and commonly insured against in connection
with the performance of Ridge's obligations hereunder.
(c) all insurance shall name THUSA or its affiliate as the
case may be, as an additional insured.
12. Indemnification.
(a) Ridge will indemnify THUSA and/or its affiliate for
any losses incurred in connection with the performance of Ridge's
obligations.
(b) Ridge shall be liable to THUSA for merchandise shortages
and damage to the Warehouse resulting from the acts or negligence
of Ridge and its employees.
-3-
<PAGE>
13. Termination.
(a) Should Ridge be adjudicated bankrupt, insolvent or
placed in receivership, or should proceedings be instituted by or
against Ridge for bankruptcy, insolvency, or receivership,
agreement of composition or assignment for the benefit of
creditors, or if this Agreement should pass to another by virtue
of any court proceedings, writ of execution, levy, sale or by
operation of law, THUSA may, if it so elects, at any time
thereafter, terminate this Agreement upon giving Ridge thirty
(30) days notice in writing of its intention to terminate.
(b) In the event of a default hereunder by Ridge, THUSA may
terminate this Agreement on fifteen (15) days written notice to
Ridge. During said fifteen (15) days, Ridge shall be permitted
to cure the default.
14. Benefit. This Agreement shall inure to the benefit of
and be binding upon the parties hereto, and their successors and
assigns.
15. Entire Agreement; Amendment. This Agreement
constitutes the entire agreement of the parties hereto with
respect to the subject matter hereof and this Agreement may not
be amended or modified, except in a writing signed by both
parties hereto.
16. Non-Waiver. The failure of either party to enforce at
any time any term, provision or condition of this Agreement, or
to exercise any right or option herein, shall in no way operate
as a waiver thereof, nor shall any single or partial exercise
preclude any other right or option herein; and no waiver
whatsoever shall be valid unless in writing, signed by the
waiving party, and only to the extent herein set forth.
17. Assignment.
(a) This Agreement is personal in nature, and Ridge may not
and shall not sell, transfer, lease, sublicense or assign this
Agreement or its rights and interest hereunder, or any part
hereof, by operation of law or otherwise, without the prior
written consent of THUSA, which consent may be withheld by THUSA
in its sole and absolute discretion, except that Ridge shall have
the right, upon written notice to THUSA, to assign this Agreement
to a corporation, subsidiary or affiliate under the same
direction and control as Ridge; provided, however, that in such
event Ridge agrees to guarantee the performance and obligations
of such corporation, subsidiary or affiliate under this
Agreement.
(b) A sale or other transfer of all or substantially all of
the assets of Ridge or a change in the control of Ridge shall be
deemed an assignment of Ridge's rights and interests under this
Agreement to which the terms and conditions of Paragraph 16(a)
above shall apply.
(c) Any transfer, by operation of law or otherwise, of
Ridge's interest in this Agreement (in whole or in part) or an
interest in Ridge (whether stock, partnership, interest or
otherwise) shall be deemed an assignment of Ridge's rights and
interest under this Agreement to which the terms and
-4-
<PAGE>
conditions of Paragraph 17(a) above shall apply. The issuance of
shares of stock to other than the existing shareholders is deemed
to be a transfer of that stock for the purposes of this paragraph.
18. Severability. If any provision or any portion of any
provision of this Agreement shall be construed to be illegal,
invalid, or unenforceable, such shall be deemed stricken and
deleted from this Agreement to the same extent and effect as if
never incorporated herein, but all other provisions of this
Agreement and any remaining portion of any provision which is
illegal, invalid or unenforceable in part shall continue in full
force and effect.
19. Notices. All reports, approvals and notices required
or permitted to be given under this Agreement shall, unless
specifically provided otherwise in this Agreement, be deemed to
have been given if personally delivered or if mailed by certified
or registered mail, at the above indicated addresses, with a
copy, if to THUSA to: Steven R. Gursky, Esq., Gursky &
Associates, P.C., 21 East 40th Street, 15th Floor, New York, New
York 10016. The parties may change their address for receipt of
notices at any time upon notice to the other party.
20. Headings. The headings of the Paragraphs of this
Agreement are for convenience only and in no way limit or affect
the terms or conditions of this Agreement.
21. Counterparts. This Agreement may be executed in two
(2) or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the
same instrument.
22. Construction. This Agreement shall be interpreted and
construed in accordance with the laws of the State of New Jersey
with the same force and effect as if fully executed and to be
performed therein.
IN WITNESS WHEREOF, the parties have executed this
Agreement.
TOMMY HILFIGER U.S.A., INC.
By: /s/ Joel Newman
Title: Exec VP Operations
& Finance
RIDGE SERVICES, INC.
By: /s/ Dom A. Telesco
Title: Chairman/CEO
<PAGE>
GUARANTY
GUARANTY given by TANDEM DISTRIBUTION SERVICES, INC.
("Tandem") to TOMMY HILFIGER U.S.A., INC. ("THUSA") to induce
THUSA to enter into a warehouse agreement (the "Warehouse
Agreement") with Tandem's subsidiary RIDGE SERVICES, INC.
("Ridge").
In consideration of the foregoing, Tandem hereby guarantees
to THUSA the prompt performance of all of Ridge's duties and
obligations under the Warehouse Agreement as if Tandem executed
said agreement in Ridge's stead.
All of Tandem's liability hereunder shall mature immediately
without notice or demand.
Tandem shall be bound by any amendments or modifications
which are agreed to by Ridge.
Dated: As of April 1, 1997 TANDEM DISTRIBUTION
SERVICES, INC.
By: /s/ Dom A. Telesco
Dom A. Telesco
Chairman/CEO
EXHIBIT 10.19
AGREEMENT
AGREEMENT made as of the 1st day of April, 1997, by and
between RIDGE SERVICES INC. (hereinafter "Ridge"), whose address
is 112 Truman Drive, Edison, New Jersey 08818 and TOMMY HILFIGER
RETAIL, INC. (hereinafter "THR"), whose address is 112 Truman
Drive, Edison, New Jersey 08818.
WHEREAS, Ridge is in the business of providing all attendant
"Pick & Pack" services incidental to the movement of goods within
and without its storage facilities, and
WHEREAS, THR desires to have Ridge provide "Pick & Pack"
services at THR's warehouse facility at 112 Truman Drive, Edison,
New Jersey 08818 (the "Warehouse").
NOW, THEREFORE, in consideration of the mutual covenants
herein contained, THR and Ridge agree as follows:
1. Term. This Agreement shall commence as of April 1, 1997
and shall continue for a period of six (6) months to September
30, 1997 (the "Term"). The Term shall be automatically renewed
from month to month thereafter unless terminated by either party
on sixty (60) days written notice to the other.
2. Charges. For an annual throughput of up to 9,000,000
units, the charges (the "Charges") for the Services described in
Paragraph 3 below shall be as follows:
(a) $0.13 per unit - Inbound
(b) $0.13 per unit - Outbound
(c) $12.75 labor rate per hour for Excluded Services
(d) $0.06 per unit for transfers
Overtime may only be charged to THR if the same has been
specifically authorized by THR in writing in each instance. THR
will not pay for any overtime occasioned as a result of Ridge's
inefficiencies. THR will pay for the excess cost only of
overtime above Ridge's regular rate (currently $6.38/hour).
3. Scope of Services. In consideration for the Charges
paid by THR to Ridge, Ridge agrees to promptly provide the
following services (the "Services"):
(a) All inbound and outbound handling (including scanning)
(b) Receiving, sorting, and shelving merchandise into stock
area
(c) Selection by order format
(d) 100% verification process
(e) UPS processing
(f) Expediting of daily transactions by clerical personnel.
<PAGE>
(g) Providing cartons and tape
(h) Outbound trucking to consolidators
(I) Adhering to cleanliness standards maintained by THR,
including proper and timely disposal of waste and
restacking and resorting of merchandise.
4. Excluded Services. The following shall specifically not
be included in the Services:
(a) Cycle Counting
(b) Affixing Bar Codes
(c) Physical Inventories
(d) All space costs
(e) Outside storage (if required)
(f) Providing pallets
5. Ridge Personnel. Ridge shall employ sufficient
personnel in order to provide a monthly average of the man-hours
described below in the performance of the Services:
JOB DESCRIPTION NO. OF HOURS PER DAY
Laborers 592
Supervisors 16
Clericals 8
The hours described above shall be organized by Ridge to
provide the Services to THR in light of the varied ebb and flow
of merchandise receipts and shipping. Ridge shall employ
adequate staffing from 8:00 A.M. - 8:00 P.M. on weekdays and on
Saturdays as needed. Staffing in satisfaction of the
requirements of this paragraph shall not require the payment of
any overtime charges by THR. Ridge shall provide THR with a
monthly report of man-hours to be provided hereunder. Such
report shall be delivered to THR within ten (10) days of the end
of each month. THR shall have the right to audit Ridge's records
of such man-hours.
6. Quality Assurance. THR shall have the right to issue
and periodically update quality assurance, performance standards
and rules and regulations for Ridge's performance of this
Agreement so as to ensure customer satisfaction and efficient and
appropriate operation of the Warehouse.
7. Independent Contractor. Nothing in this Agreement is
intended nor shall be construed to create any relationship
between THR and Ridge other than that of independent contractors
and this Agreement shall not be deemed to constitute THR and
Ridge as partners, joint venturers or joint employers.
8. Employees. Neither Ridge nor the individuals it engages
to perform the services required of Ridge hereunder are employees
of THR; all such individuals shall for all purposes be Ridge's
employees, and Ridge shall have the sole authority to hire, fire,
direct, control, discipline, reward,
-2-
<PAGE>
evaluate, schedule, supervise, promote, suspend and/or terminate
Ridge's employees. In addition, Ridge shall be solely responsible
for the acts of its employees, whether of commission or omission,
and for payment of all salaries, withholding tax deductions, benefits,
unemployment compensation, workers compensation and all other
charges and liabilities arising out of the employer-employee
relationship, including, without limitation, liabilities under
any civil rights laws, wage and hour laws, equal employment
opportunity acts, any union, welfare and pension contributions
and the expense of prosecuting, defending or complying with the
award in any labor arbitration proceeding.
9. Labor Disturbance. If during the term of this Agreement
there shall occur any labor disturbance involving Ridge's
employees, whether or not such disturbance is within Ridge's
control, which involves picketing of or handbilling at any THR
facility or a strike or boycott against THR or any of its
facilities, THR may give Ridge written notice of objection to the
labor disturbance, and if such disturbance is not wholly
discontinued within forty-eight (48) hours after Ridge's receipt
of such notice, then, at THR's sole option, this Agreement and
Ridge's rights hereunder shall terminate immediately upon the
giving of such notice of termination, but THR shall remain liable
for any amounts due to Ridge with respect to work performed prior
to such termination.
10. Notice of Loss. Ridge shall give THR immediate notice
of any loss or shortage of THR merchandise. Ridge agrees to
cooperate with all respects with any investigation conducted by
THR, its agents or insurance company arising from any losses.
11. Insurance. Ridge shall, at its cost, keep in force the
following insurance:
(a) public liability insurance for the mutual benefit of
Ridge and THR against claims for bodily injury, death or property
damage occurring in connection with the performance of Ridge's
obligations hereunder with limits of not less than
$10,000,000/$10,000,000/$1,000,000.
(b) such employment and other insurance in such reasonable
amounts against other insurable hazards which at the time are
reasonably available and commonly insured against in connection
with the performance of Ridge's obligations hereunder.
(c) all insurance shall name THR or its affiliate as the
case may be, as an additional insured.
12. Indemnification.
(a) Ridge will indemnify THR and/or its affiliate for any
losses incurred in connection with the performance of Ridge's
obligations.
(b) Ridge shall be liable to THR for merchandise shortages
and damage to the Warehouse resulting from the acts or negligence
of Ridge and its employees.
-3-
<PAGE>
13. Termination.
(a) Should Ridge be adjudicated bankrupt, insolvent or
placed in receivership, or should proceedings be instituted by or
against Ridge for bankruptcy, insolvency, or receivership,
agreement of composition or assignment for the benefit of
creditors, or if this Agreement should pass to another by virtue
of any court proceedings, writ of execution, levy, sale or by
operation of law, THR may, if it so elects, at any time
thereafter, terminate this Agreement upon giving Ridge thirty
(30) days notice in writing of its intention to terminate.
(b) In the event of a default hereunder by Ridge, THR may
terminate this Agreement on fifteen (15) days written notice to
Ridge. During said fifteen (15) days, Ridge shall be permitted
to cure the default.
14. Benefit. This Agreement shall inure to the benefit of
and be binding upon the parties hereto, and their successors and
assigns.
15. Entire Agreement; Amendment. This Agreement
constitutes the entire agreement of the parties hereto with
respect to the subject matter hereof and this Agreement may not
be amended or modified, except in a writing signed by both
parties hereto.
16. Non-Waiver. The failure of either party to enforce at
any time any term, provision or condition of this Agreement, or
to exercise any right or option herein, shall in no way operate
as a waiver thereof, nor shall any single or partial exercise
preclude any other right or option herein; and no waiver
whatsoever shall be valid unless in writing, signed by the
waiving party, and only to the extent herein set forth.
17. Assignment.
(a) This Agreement is personal in nature, and Ridge may not
and shall not sell, transfer, lease, sublicense or assign this
Agreement or its rights and interest hereunder, or any part
hereof, by operation of law or otherwise, without the prior
written consent of THR, which consent may be withheld by THR in
its sole and absolute discretion, except that Ridge shall have
the right, upon written notice to THR, to assign this Agreement
to a corporation, subsidiary or affiliate under the same
direction and control as Ridge; provided, however, that in such
event Ridge agrees to guarantee the performance and obligations
of such corporation, subsidiary or affiliate under this
Agreement.
(b) A sale or other transfer of all or substantially all of
the assets of Ridge or a change in the control of Ridge shall be
deemed an assignment of Ridge's rights and interests under this
Agreement to which the terms and conditions of Paragraph 16(a)
above shall apply.
(c) Any transfer, by operation of law or otherwise, of
Ridge's interest in this Agreement (in whole or in part) or an
interest in Ridge (whether stock, partnership, interest or
otherwise) shall be deemed an assignment of Ridge's rights and
interest under this Agreement to which the terms and
-4-
<PAGE>
conditions of Paragraph 17(a) above shall apply. The issuance of
shares of stock to other than the existing shareholders is deemed
to be a transfer of that stock for the purposes of this paragraph.
18. Severability. If any provision or any portion of any
provision of this Agreement shall be construed to be illegal,
invalid, or unenforceable, such shall be deemed stricken and
deleted from this Agreement to the same extent and effect as if
never incorporated herein, but all other provisions of this
Agreement and any remaining portion of any provision which is
illegal, invalid or unenforceable in part shall continue in full
force and effect.
19. Notices. All reports, approvals and notices required
or permitted to be given under this Agreement shall, unless
specifically provided otherwise in this Agreement, be deemed to
have been given if personally delivered or if mailed by certified
or registered mail, at the above indicated addresses, with a
copy, if to THR to: Steven R. Gursky, Esq., Gursky & Associates,
P.C., 21 East 40th Street, 15th Floor, New York, New York 10016.
The parties may change their address for receipt of notices at
any time upon notice to the other party.
20. Headings. The headings of the Paragraphs of this
Agreement are for convenience only and in no way limit or affect
the terms or conditions of this Agreement.
21. Counterparts. This Agreement may be executed in two
(2) or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the
same instrument.
22. Construction. This Agreement shall be interpreted and
construed in accordance with the laws of the State of New Jersey
with the same force and effect as if fully executed and to be
performed therein.
IN WITNESS WHEREOF, the parties have executed this
Agreement.
TOMMY HILFIGER RETAIL, INC.
By: /s/ Joel Newman
Title: Vice President
RIDGE SERVICES, INC.
By: /s/ Dom A. Telesco
Title: Chairman/CEO
-5-
<PAGE>
GUARANTY
GUARANTY given by TANDEM DISTRIBUTION SERVICES, INC.
("Tandem") to TOMMY HILFIGER RETAIL, INC. ("THR") to induce THR
to enter into a warehouse agreement (the "Warehouse Agreement")
with Tandem's subsidiary RIDGE SERVICES, INC. ("Ridge").
In consideration of the foregoing, Tandem hereby guarantees
to THR the prompt performance of all of Ridge's duties and
obligations under the Warehouse Agreement as if Tandem executed
said agreement in Ridge's stead.
All of Tandem's liability hereunder shall mature immediately
without notice or demand.
Tandem shall be bound by any amendments or modifications
which are agreed to by Ridge.
Dated: As of April 1, 1997 TANDEM DISTRIBUTION
SERVICES, INC.
By: /s/ Dom A. Telesco
Dom A. Telesco
Chairman/CEO
EXHIBIT 10.31
LICENSE AGREEMENT
BETWEEN
TOMMY HILFIGER LICENSING, INC.
AND
PEPE JEANS LONDON CORPORATION<PAGE>
ARTICLE 1. DEFINITIONS...............................................2
1.1 AFFILIATES OF LICENSEE....................................2
1.2 AGREEMENT.................................................3
1.3 ANNUAL PERIOD.............................................3
1.4 CLOSE-OUTS................................................3
1.5 FULL PRICE SALES..........................................3
1.6 GROSS SALES...............................................3
1.7 GUARANTEED MINIMUM ROYALTY................................3
1.8 INDEX.....................................................3
1.9 INVENTORY.................................................3
1.10 INVENTORY SCHEDULE........................................3
1.11 LABELS....................................................3
1.12 LICENSED PRODUCTS.........................................3
1.13 MANUFACTURED PRODUCTS ....................................3
1.14 MINIMUM SALES LEVEL.......................................3
1.15 NET SALES.................................................4
1.16 OFF-PRICE SALES...........................................4
1.17 PERCENTAGE ROYALTY........................................4
1.18 PURCHASED PRODUCTS .......................................4
1.19 SEASONAL COLLECTIONS......................................4
1.20 SECONDS...................................................4
1.21 TERM......................................................4
1.22 TERRITORY.................................................4
1.23 TRADE SECRETS.............................................4
1.24 TRADEMARK.................................................4
ARTICLE 2. GRANT.....................................................4
2.1 LICENSE...................................................4
2.2 RESERVATIONS..............................................5
2.3 TERRITORY.................................................5
2.4 FIRST REFUSAL.............................................5
2.5 EXCLUSIVITY...............................................5
2.6 DEFINITIONAL DISPUTES.....................................6
2.7 BEST EFFORTS..............................................6
2.8 SHOWROOMS AND IN-STORE SHOPS..............................6
2.9 SALES AND DELIVERIES......................................7
2.10 ORGANIZATION..............................................7
2.11 USE OF LICENSED LEGEND....................................7
2.12 PURCHASE OF LICENSED PRODUCTS.............................7
ARTICLE 3. TERM OF THE AGREEMENT.....................................8
3.1 INITIAL TERM..............................................8
3.2 EXTENSION.................................................8<PAGE>
ARTICLE 4. SALES.....................................................8
4.1 SALES/MARKETING AND PRODUCTION PLANS......................8
4.2 MINIMUM SALES LEVELS......................................9
4.3 CERTIFICATION.............................................9
ARTICLE 5. LICENSE FEES..............................................9
5.1 REQUIREMENT OF ROYALTIES..................................9
5.2 GUARANTEED MINIMUM ROYALTY................................9
5.3 ACTUAL ROYALTIES.........................................10
5.4 ROYALTY STATEMENTS.......................................10
5.5 BOOKS AND RECORDS........................................11
5.6 TAXES....................................................11
5.7 UNDERPAYMENTS............................................11
5.8 MANNER OF PAYMENT........................................11
5.9 INTEREST ON LATE PAYMENTS................................11
5.10 NO SET-OFF...............................................12
5.11 PURCHASES BY LICENSOR'S FLAGSHIP STORES..................12
5.12 FINANCIAL STATEMENTS.....................................12
ARTICLE 6. REPRESENTATIONS AND WARRANTIES...........................12
6.1 WARRANTIES AND REPRESENTATIONS OF LICENSOR...............12
6.2 WARRANTIES AND REPRESENTATIONS OF LICENSEE...............14
ARTICLE 7. ADVERTISING..............................................14
7.1 ADVERTISING..............................................14
7.2 ADVERTISING EXPENDITURE..................................15
7.3 APPROVAL OF PACKAGING, LABELING AND ADVERTISING..........15
7.4 USE OF TRADEMARK ON INVOICES, ETC........................15
7.5 LAUNCH...................................................16
ARTICLE 8. QUALITY AND STANDARDS....................................16
8.1 DISTINCTIVENESS AND QUALITY OF THE TRADEMARK.............16
8.2 SHOPS, STORES, RETAIL OUTLETS............................16
8.3 SAMPLES OF MANUFACTURED PRODUCTS.........................17
8.4 NON-CONFORMING PRODUCTS..................................17
8.5 APPROVALS................................................18
8.6 APPROVAL WITHDRAWAL......................................18
8.7 SAMPLES, ARTWORK AND KNOW-HOW............................18
8.8 CONFIDENTIALITY..........................................19
8.9 MANUFACTURE OF LICENSED PRODUCTS BY THIRD PARTIES........19
8.10 MARKING, LABELING AND PACKAGING IN ACCORDANCE
WITH APPLICABLE LAWS.....................................20
8.11 DISPOSAL OF SECONDS AND CLOSE-OUTS.......................20
8.12 ASSISTANCE BY LICENSOR...................................21
8.13 MEETINGS.................................................21
8.14 DESIGN RIGHTS............................................21<PAGE>
8.15 PRICING..................................................22
ARTICLE 9. THE TRADEMARK............................................22
9.1 RIGHTS TO THE TRADEMARK..................................22
9.2 PROTECTING THE TRADEMARK.................................22
9.3 COMPLIANCE WITH LEGAL REQUIREMENTS.......................22
9.4 OWNERSHIP OF COPYRIGHT...................................23
9.5 NOTICE OF INFRINGEMENT...................................23
9.6 COUNTERFEIT PROTECTION...................................23
9.7 USE OF OTHER TRADEMARKS..................................23
9.8 USE OF TRADEMARK ON INVOICES, ETC........................24
9.9 MONITORING...............................................24
ARTICLE 10. INSOLVENCY...............................................24
10.1 EFFECT OF PROCEEDING IN BANKRUPTCY, ETC..................24
10.2 RIGHTS, PERSONAL.........................................24
10.3 TRUSTEE IN BANKRUPTCY....................................24
ARTICLE 11. TERMINATION..............................................25
11.1 OTHER RIGHTS UNAFFECTED..................................25
11.2 TERMINATION WITHOUT NOTICE...............................25
11.3 TERMINATION WITH NOTICE..................................26
11.4 EFFECT OF TERMINATION....................................26
11.5 INVENTORY UPON TERMINATION...............................26
11.6 CONTRIBUTION FROM SEL....................................27
11.7 FREEDOM TO LICENSE.......................................27
11.8 EQUITABLE RELIEF.........................................27
11.9 TERMINATION WITHOUT PREJUDICE............................27
11.10 WAIVER...................................................27
ARTICLE 12. RELATIONSHIP BETWEEN THE PARTIES.........................28
12.1 NO AGENCY................................................28
ARTICLE 14. BENEFIT..................................................28
14.1 BENEFIT..................................................28
ARTICLE 15. ENTIRE AGREEMENT; AMENDMENT..............................28
15.1 ENTIRE AGREEMENT; AMENDMENT..............................28
ARTICLE 16. NON-WAIVER...............................................28
16.1 NON-WAIVER...............................................28
ARTICLE 17. ASSIGNMENT...............................................28
17.1 NO ASSIGNMENT WITHOUT CONSENT............................28
17.2 SALE OF ASSETS...........................................29<PAGE>
17.3 SALE OF STOCK/INTEREST...................................29
17.4 ASSIGNMENT BY LICENSOR...................................29
ARTICLE 18. INDEMNIFICATION AND INSURANCE............................29
18.1 INDEMNIFICATION BY LICENSEE..............................29
18.2 NOTICE OF SUIT OR CLAIM..................................30
18.3 INDEMNIFICATION BY LICENSOR..............................30
18.4 INSURANCE................................................30
ARTICLE 19. SEVERABILITY.............................................31
19.1 SEVERABILITY.............................................31
ARTICLE 20. NOTICES..................................................31
20.1 NOTICES..................................................32
ARTICLE 21. SUSPENSION OF OBLIGATIONS................................32
21.1 SUSPENSION OF OBLIGATIONS................................32
ARTICLE 22. EXHIBITS.................................................33
22.1 EXHIBITS.................................................33
ARTICLE 23. OTHER PROVISIONS.........................................33
23.1 HEADINGS.................................................33
23.2 COUNTERPARTS.............................................33
23.3 CONSTRUCTION.............................................33
23.4 JURISDICTION.............................................33
23.5 COMPLIANCE WITH LAWS.....................................33
EXHIBITS
EXHIBIT A..................................................TRADEMARKS
EXHIBIT B......................................STATEMENT OF ROYALTIES
EXHIBIT C........................................SAMPLE APPROVAL FORM
EXHIBIT D......................................MANUFACTURER AGREEMENT
EXHIBIT E............................................ADVERTISING FORM
EXHIBIT F.................................................TERRITORIES
EXHIBIT G...............................................CERTIFICATION
<PAGE>
EXHIBIT 10 (b)
LICENSE AGREEMENT
AGREEMENT made effective as of the 1st day of
February, 1997, by and between TOMMY HILFIGER LICENSING, INC.,
having an address at 913 N. Market Street, Wilmington, Delaware
19801 (hereinafter referred to as "Licensor") and Pepe Jeans
London Corporation, a British Virgin Islands corporation,
having its registered address at Craigmuir Chambers, P.O. Box
71, Road Town, Tortola, British Virgin Islands (hereinafter
referred to as "Licensee").
W I T N E S S E T H :
WHEREAS, the TOMMY HILFIGER trademarks, as
hereinafter defined (collectively the "Trademark"), are unique,
extraordinary and have an established, outstanding reputation
in connection with certain items of clothing and other
products; and
WHEREAS, Licensor has the right to enter into this
Agreement; and
WHEREAS, Licensee recognizes the great value and
goodwill associated with the Trademark and that all rights to
the Trademark and the associated goodwill belong exclusively to
the Licensor and that the Trademark has acquired a secondary
meaning to the public; and
WHEREAS, Licensee desires to obtain an exclusive
right to use the Trademark, on and in connection with the
manufacture, sale and distribution of Licensed Products (as
hereinafter defined) bearing, incorporating or otherwise
utilizing the Trademark in the Territory; and
WHEREAS, Licensor has agreed to grant to Licensee
such license under and subject to the terms and conditions
hereinafter set forth;
NOW, THEREFORE, the parties hereto, in consideration
of the mutual agreements herein contained and promises herein
expressed, and for other good consideration acknowledged by
each of them to be satisfactory and adequate, do hereby agree
as follows:
ARTICLE 1. DEFINITIONS
Definitions. The following terms shall have the
following meanings when used in this Agreement attached hereto:
1.1 AFFILIATES OF LICENSEE shall mean all persons
and business entities, whether corporations, partnerships,
joint ventures or otherwise, which now or hereafter control, or
are owned or controlled, directly or indirectly by Licensee, or
are under common control with Licensee.
-2-<PAGE>
1.2 AGREEMENT shall mean this agreement.
1.3 ANNUAL PERIOD shall mean each twelve month
period commencing on April 1 and ending on March 31, except
that the first Annual Period shall be the period commencing on
the date hereof and ending on March 31, 1998.
1.4 CLOSE-OUTS shall mean first quality Licensed
Products which cannot reasonably be sold to regular customers.
1.5 FULL PRICE SALES shall mean sales of Licensed
Products at less than * off of the standard selling price in
the then current line sheet, as amended from time to time.
1.6 GROSS SALES shall mean the invoiced amount of
Licensed Products shipped by Licensee before any deductions for
discounts and returns, insurance and freight.
1.7 GUARANTEED MINIMUM ROYALTY shall mean the
minimum royalties payable in each Annual Period as set forth in
Article 5.2.
1.8 INDEX shall mean the Consumer Price Index for
the United States. If publication of the Index is
discontinued, the parties hereto shall accept comparable
statistics for the United States as computed and published by
an agency or a responsible financial periodical or recognized
authority then to be selected by the parties.
1.9 INVENTORY shall mean Licensee's inventory of
Licensed Products and of related work in progress.
1.10 INVENTORY SCHEDULE shall mean a complete and
accurate schedule of Inventory.
1.11 LABELS shall mean all labels, tags, packaging
material, business supplies and advertising and promotional
materials and all other forms of identification bearing the
Trademark.
1.12 LICENSED PRODUCTS shall mean mens and boys
sportswear (excluding jeanswear and jeans related apparel). In
addition, Licensed Products shall, to the extent permitted by
Licensor from time to time, include accessories and other
products which are produced by other licensees of Licensor.
1.13 MANUFACTURED PRODUCTS shall mean Licensed
Products which are manufactured by or for Licensee through
sources approved by Licensor other than Tommy Hilfiger (Eastern
Hemisphere) Limited ("THEH") and Tommy Hilfiger U.S.A., Inc.
("THUSA").
1.14 MINIMUM SALES LEVEL shall mean the minimum Net
Sales of Licensed Products during each Annual Period as set
forth in Article 4.2.
* This information has been omitted pursuant to a request
for confidential treatment filed with the Securities and
Exchange Commission.
-3-<PAGE>
1.15 NET SALES shall mean the gross sales price of
Licensed Products to retailers who are not Affiliates of
Licensee, less returns actually allowed and actually received
by Licensee, price allowances and customary and usual trade
discounts granted. Taxes on Net Sales such as value added
taxes or its equivalent shall be deducted and separately
listed. No other deductions shall be taken. It is the
intention of the parties that royalties will be based on the
bona fide wholesale prices at which Licensee sells Licensed
Products to independent retailers in arms' length transactions.
In the event Licensee shall sell Licensed Products to its
Affiliates, royalties shall be calculated on the basis of such
a bona fide wholesale price irrespective of Licensee's internal
accounting treatment of such sale. Licensee shall identify
separately in the statements of operations provided to Licensor
pursuant to Article 5.4 hereof, all sales to Affiliates.
1.16 OFF-PRICE SALES shall mean sales at * or more
off of the standard selling price in the then current
linesheet, as amended from time to time.
1.17 PERCENTAGE ROYALTY shall have the definition
given that term in Article 5.3.
1.18 PURCHASED PRODUCTS shall means Licensed
Products which are sourced through THEH or THUSA in accordance
with Article 2.12(a).
1.19 SEASONAL COLLECTIONS shall mean at least four
(4) collections per annum.
1.20 SECONDS shall mean damaged, imperfect, non-
first quality or defective goods.
1.21 TERM shall mean the Initial Term as defined
Article 3.1 and shall, if not otherwise specifically excluded,
include all Extensions hereinafter defined in Article 3.2.
1.22 TERRITORY shall mean those countries set forth
on Exhibit F, attached hereto.
1.23 TRADE SECRETS shall mean information including
a formula, pattern, compilation, program, device, method,
technique, or process, that derives independent economic value,
actual or potential, from not being generally known to the
public or to other persons who can obtain economic value from
its disclosure or use; and is the subject of efforts that are
reasonable under the circumstances to maintain its secrecy.
1.24 TRADEMARK shall mean the trademark
registrations which are set forth in the annexed Exhibit A and
such trademarks in classes covering the Licensed Products
whether or not registered with the relevant authority in the
Territory, and all combinations, forms and derivatives thereof
which may be hereafter approved by Licensor for use by Licensee
in connection with the Licensed Products subject to any
conditions set forth in any written approval.
* This information has been omitted pursuant to a request
for confidential treatment filed with the Securities and
Exchange Commission.
-4-<PAGE>
ARTICLE 2. GRANT
2.1 LICENSE. Licensor hereby grants to Licensee an
exclusive license during the Term of the Agreement, subject to
all of the terms and conditions contained in this Agreement to
use the Trademark in connection with the manufacture, distribu-
tion and sale of the Licensed Products in the Territory. Li-
censor further grants to Licensee the right to use the Trade-
mark, subject to Article 11.4 hereof, in connection with estab-
lishing a subsidiary or division to be named "Tommy Hilfiger
Europe BV" or such other name as may be approved by Licensor.
Licensor and any subsidiaries or affiliated companies specifi-
cally reserve the right to establish and offer for sale
Licensed Products through up to * flagship retail locations
throughout the Territory, with a maximum of * flagship loca-
tions per city.
2.2 RESERVATIONS. The license granted in this
Article 2 does not grant any right to Licensee to use the name
"TOMMY" or "HILFIGER" individually or derivatives of the
Trademark. Nothing contained in this Agreement shall be
construed as an assignment or grant to Licensee of any right,
title or interest in or to the Trademark, it being understood
and acknowledged by Licensee that all rights relating thereto
are reserved by Licensor except for the rights specifically
granted to Licensee in this Agreement. Licensee understands
and agrees that Licensor, and its other licensees and
sublicensees, may manufacture or authorize third parties to
manufacture Licensed Products in the Territory for ultimate
sale outside of the Territory, or to manufacture and sell or
authorize third parties to manufacture and sell products of any
and all types and descriptions other than the Licensed Products
in or outside the Territory. In addition, to the extent it is
legally permissible to do so, no license is granted hereunder
for the manufacture, sale or distribution of the Licensed
Products to be used for publicity purposes, other than
publicity of the Licensed Products, in combination sales,
premiums or giveaways, or to be disposed of under or in
connection with similar methods of merchandising, such license
being specifically reserved for Licensor.
2.3 TERRITORY. Licensee agrees that it will neither
export Licensed Products from the Territory nor sell same to
any entity which it knows or has any reason to believe intend
to export Licensed Products from the Territory. Licensee will
use its best efforts to prohibit its customers from shipping
Licensed Products outside of the Territory.
2.4 FIRST REFUSAL. Licensor agrees that before
granting a license to any third party to use any of the
Trademarks or any other Trademark similar therein for any
products other than Licensed Products in the Territory,
Licensor shall give written notice to Licensee of its intent to
grant such license, and Licensee shall have the right of first
refusal, to be asserted within thirty (30) days in writing, to
obtain such license upon terms no less favorable than those to
be offered to the third party. In the event that Licensor and
Licensee fail to reach an agreement with respect to the
proposed license, then Licensor may enter into a license with
the third party; provided, however, that the terms and
conditions of such license with the third party shall not be
more favorable that those offered to Licensee.
* This information has been omitted pursuant to a request
for confidential treatment filed with the Securities and
Exchange Commission.
-5-<PAGE>
2.5 EXCLUSIVITY. Licensor shall not authorize third
parties to use the Trademark in connection with the sale and/or
importation of the Licensed Products in the Territory during
the Term hereof without Licensee's prior written approval, but
Licensee acknowledges and consents to Licensor's use of the
Trademarks in connection with the sale and/or importation of
Licensed Products in the Territory. Licensor hereby agrees
that Licensee shall have the exclusive right to import into and
resell the Licensed Products in the Territory.
2.6 DEFINITIONAL DISPUTES. Licensee acknowledges
that due to the nature of the marketplace, the definition of
Licensed Products may change or may not be amenable to precise
delineation. Licensee agrees that if there is a dispute over
the definition of Licensed Products, Licensor shall render a
reasonable written determination which shall be conclusive and
binding on Licensee without legal recourse.
2.7 BEST EFFORTS. At all times while this Agreement
is in effect, Licensee shall use its best efforts to exploit
the License granted hereunder throughout the Territory,
including but not limited to, selling a sufficiently
representative quantity of the Licensed Products of all styles,
fabrications and colors; offering for sale the Licensed
Products so that they may be sold to the consumer on a timely
basis; maintaining a sales force sufficient to provide
effective distribution throughout all areas of the Territory;
and cooperating with Licensor's and any of its licensees'
marketing, merchandising, sales and anti-counterfeiting
programs.
2.8 SHOWROOMS AND IN-STORE SHOPS.
(a) Licensee shall display the Licensed
Products for sale in a separate showroom, designed and
displayed in accordance with Licensor's specifications, apart
from any showroom(s) in which Licensee or another business may
offer other than Licensed Products for sale. Subject to prior
approval by Licensor, Licensee may display the Trademark on
showroom doors and office directories;
(b) Licensor reserves the right to approve the
location of Licensee's primary showroom required by Article
2.8(a) above; and
(c) Not later than by the end of the third
Annual Period, Licensee shall establish and display the
Licensed Products in showrooms designed and displayed in
accordance with Licensor's specifications, apart from any
showroom(s) in which Licensee or another business may offer
other than Licensed Products for sale, to be located in
Dusseldorf, Germany; Paris, France; Madrid, Spain; London,
England; and Amsterdam, Holland.
(d) Licensee will, at Licensor's option,
participate in any in-store shop or main floor fixturing
program with any of Licensee's customers. To that end, to the
extent that the same is not paid for by Licensee's customers,
Licensee shall pay for the necessary fixturing for the display
of the Licensed Products which shall be in keeping with the
specifications and design of the respective shop or main floor
fixtures.
-6-<PAGE>
(e) Not later than the end of the Initial Term,
Licensee shall be offering for sale the Licensed Products in at
least * retail locations (in-store shops or specialty stores)
throughout the Territory.
2.9 SALES AND DELIVERIES. Licensee acknowledges
that the availability and selection of styles, fabrications,
colors and sizes are an integral part of the high reputation
and value which the trade and consumers have come to associate
with the Trademark. Therefore, to protect that reputation and
value, Licensee agrees that its policy of sale, distribution,
and exploitation shall be of a high standard and to the best
advantage, and that the same shall in no way adversely reflect
upon the good name, trademarks and trade names of Licensor or
any of its programs. Licensee further agrees that it will use
due diligence to make certain that at all times no less than *
of the Licensed Products ordered and approved by Licensee for
shipment are shipped timely in compliance with the shipping
schedule recited in each order. Licensee shall at all times
maintain a sales force for the sale of the Licensed Products
which shall be sufficient to provide effective distribution of
the Licensed Products throughout the entire Territory.
2.10 ORGANIZATION. Licensee shall, within thirty
(30) days of the date hereof, establish a separate division of
its company dedicated exclusively to the sale of Licensed
Products throughout the Territory. In lieu of such separate
division, Licensee may form a subsidiary company provided that
such company shall agree in writing to be bound by all of the
terms hereof. Licensee shall, at its sole cost and expense,
employ a head of sales, a production manager and a production
assistant who shall work exclusively with Licensor's
representatives on the Licensee's business arising under this
Agreement and shall report directly to the President of
Licensee or his designee. Licensee shall also employ a
"stylist" to work with Licensor's representatives in the design
of the Licensed Products and to assist in product development.
These individuals will be hired with the prior approval of
Licensor and will be relieved of their duties under this
Agreement at the request of Licensor. In addition, Licensee
shall maintain a separate sales force for the sale of the
Licensed Products. The members of such sales force may not
sell or represent any products other than the Licensed
Products.
2.11 USE OF LICENSED LEGEND. Licensee shall, with
the prior written approval of Licensor, have the right to place
the legend "Licensed by Tommy Hilfiger Licensing, Inc.", or
such other legend which indicates that the Licensed Products
were manufactured, sold and distributed under the license from
the Licensor, on the Licensed Products and on all wrapping or
packaging used in connection therewith, within the Territory.
2.12 PURCHASE OF LICENSED PRODUCTS.
(a) Licensee hereby agrees that all Purchased
Products shall be exclusively purchased by Licensee through
Licensor or its designees, or any other sources approved by
Licensor, and shall be purchased from no other source.
Licensee shall enter into an exclusive buying office agreement
with THEH and THUSA, for the purchases of Purchased Products.
Pursuant to such buying office agreements, Licensee shall pay
to THEH or THUSA a buying office commission of *
* This information has been omitted pursuant to a request
for confidential treatment filed with the Securities and
Exchange Commission.
-7-<PAGE>
of the F.O.B. price of all Purchased Products.
(b) In the event Licensee purchases Purchased
Products (other than mens and boys sportswear) from a source
other than Licensor or its designee, which shall in all events
be a source approved by Licensor, Licensee shall pay to
Licensor an administrative fee in the amount equal to * of the
invoice price of all such Purchased Products.
(c) Licensee may only source Licensed Products
directly, without THEH or THUSA, if the type of approved
Licensed Product is not then being sourced by THEH or THUSA.
For example, if THEH and THUSA are, at the applicable time, not
in the business of sourcing tailored clothing through their
sources approved by Licensor, then Licensee may source the
tailored clothing through its sources approved by Licensor. In
such event, such Licensed Products shall be defined as the
Manufactured Products and purchases of such products shall be
excluded from any administrative fee. In no event shall
Licensee be permitted to source Licensed Products through
sources, or even through its own factories, which have not been
approved by Licensor.
ARTICLE 3. TERM OF THE AGREEMENT
3.1 INITIAL TERM. The initial term of this
Agreement shall commence on the date hereof and shall end on
March 31, 2002 (the "Initial Term").
3.2 EXTENSION. Providing that Licensee is not then
in default and is not in default for the balance of the initial
Term, Licensee shall have the right to extend this Agreement
for successive five (5) year terms on six (6) months prior
written notice to Licensor. Licensee acknowledges that the six
(6) month period for notice is necessary in order to maintain
the continuity of Licensor's Licensing and Marketing programs
and the goodwill associated with the Trademark. Licensee
agrees that "time is of the essence" and that Licensee's
failure to exercise its option to renew timely shall be
construed as a decision by Licensee that it has elected not to
renew and shall permit Licensor to immediately replace Licensee
by executing a new License Agreement with third parties, to
commence after this Agreement has concluded, without any
liability to Licensee. Expiration or termination of this
Agreement shall not effect any obligation of Licensee to make
payments hereunder accruing prior to such expiration or
termination.
ARTICLE 4. SALES
4.1 SALES/MARKETING AND PRODUCTION PLANS. On each
January 1 and July 1 of each Annual Period during the Term,
Licensee will submit to Licensor, for Licensor's approval, a
schedule showing in detail the projected sales and marketing
plans for the Licensed Products for each of the next two
quarterly periods. In addition, Licensee will submit to
Licensor upon execution of the Agreement a proposed production
calendar for the Licensed Products. Licensee will work with
Licensor to create a production calendar for Licensed Products
that is agreeable to both parties.
* This information has been omitted pursuant to a request
for confidential treatment filed with the Securities and
Exchange Commission.
-8-<PAGE>
Licensee shall provide to Licensor, on a monthly basis, monthly
wholesale bookings reports and retail selling reports.
Licensor shall be deemed to have approved the sales and
marketing plans unless Licensor gives Licensee written notice
to the contrary within ten (10) days of receipt of such plans.
4.2 MINIMUM SALES LEVELS. The first bona fide
shipment of Licensed Products to a customer of Licensee shall
occur no later than *. In addition, during each Annual Period,
Licensee shall be required to meet the following minimum levels
of Net Sales of the Licensed Products ("Minimum Sales Levels"):
Minimum Sales
Annual Period Level
First *
Second *
Third *
Fourth *
Fifth *
each Annual Period thereafter *
For purposes of calculating the Minimum Sales Level for each
Annual Period, the Minimum Sales Level shall be calculated
using the rate of foreign exchange in effect at the Midland
Bank PLC at the close of business on the date of each Royalty
or Guaranteed Minimum Royalties payment hereunder. *
4.3 CERTIFICATION. Within sixty (60) days of the
end of each Annual Period, Licensee shall send to Licensor a
certification by a duly authorized officer of Licensee of the
Net Sales of Licensed Products during such Annual Period (the
"Certification"). Within one hundred twenty (120) days of the
end of each Annual Period, Licensee shall send to Licensor the
Certification further certified by Licensee's external
auditors.
ARTICLE 5. LICENSE FEES
5.1 REQUIREMENT OF ROYALTIES. Except as
specifically provided herein, all Licensed Products sold by
Licensee, or its Affiliates or subsidiaries, require the
payment of royalties by Licensee to Licensor as set forth in
this Article 5.
* This information has been omitted pursuant to a request
for confidential treatment filed with the Securities and
Exchange Commission.
-9-<PAGE>
5.2 GUARANTEED MINIMUM ROYALTY.
(a) In consideration of the rights granted to
Licensee pursuant to this Agreement, Licensee shall, during
each Annual Period or portion thereof calculated on a pro rata
basis, during the Term, pay to Licensor the Guaranteed Minimum
Royalties listed below, payable in quarterly installments in
advance on the first day of each quarter during each year
during the Term hereof, except that for the First Annual
Period, the Guaranteed Minimum Royalties shall be paid in four
(4) equal quarterly installments beginning on *. In the event
that during any Annual Period, the actual payments under
Article 5.3 hereof exceed the entire Guaranteed Minimum Royalty
with respect to that Annual Period, no further Guaranteed
Minimum Royalty payments need be made for such Annual Period.
Guaranteed Minimum
Annual Period Royalty
First *
Second *
Third *
Fourth *
Fifth *
each Annual Period thereafter *
(b) The Guaranteed Minimum Royalty for each
Annual Period from the Second through Fifth Annual Periods only
shall be the greater of the amounts set forth above for such
Annual Periods or * of the Percentage Royalty due for the
immediately preceding Annual Period.
5.3 ACTUAL ROYALTIES. In consideration of the
rights granted to Licensee pursuant to this Agreement, Licensee
shall, during each Annual Period or portion thereof during the
Term and any extension thereof, pay Licensor a royalty (the
"Percentage Royalty") equal to * of Net Sales sold at Full
Price by Licensee and * of Net Sales sold by Licensee at Off
Price.
Percentage Royalties shall be payable in quarterly
installments on January 30, April 30, July 30 and October 30
for the immediately preceding quarter of sale, less Guaranteed
Minimum Royalty payments for such period. All royalties shall
accrue upon the sale of the Licensed Products regardless of the
time of collection by Licensee. For purposes of this Article
5.3, a Licensed Product shall be considered "sold" upon the
date of billing, invoicing, shipping, or payment, whichever
occurs first.
* This information has been omitted pursuant to a request
for confidential treatment filed with the Securities and
Exchange Commission.
-10-<PAGE>
5.4 ROYALTY STATEMENTS. Licensee will deliver to
Licensor at the time each Percentage Royalty payment is due,
complete and accurate statements, in the form annexed hereto as
Exhibit B, or similar form approved for use by Licensor signed
by a duly authorized officer of Licensee and certified by him/
her as accurate indicating all of the following information by
month: (i) the total invoice price of all Licensed Products
sold during the period covered by such percentage royalty
payment; (ii) the amount of discounts and credits from Gross
Sales which properly may be deducted therefrom, during said
period; and (iii) computation of the amount of percentage
royalty payable hereunder for said period. At least once
annually, or more often at Licensor's request, Licensee will
also deliver to Licensor a certification from its external
auditors that the statement which it accompanies is in
accordance with the requirements of this Article 5.4. Receipt
or acceptance by Licensor of any statement furnished, or of any
sums paid by Licensee, shall not preclude Licensor from
questioning their correctness at any time; provided, however,
that reports submitted by Licensee shall be binding and
conclusive on Licensee in the event of any termination based on
a breach by Licensee arising out of any payment or report.
5.5 BOOKS AND RECORDS. Licensee shall, at its sole
cost and expense, maintain complete and accurate books and
records (specifically including, without limitation, the
originals or copies of documents supporting entries in the
books of account) covering all transactions arising out of or
relating to this Agreement. In addition, Licensor and its duly
authorized representative have the right, during normal
business hours, for the duration of this Agreement and for
three (3) years thereafter, to examine and copy said books and
records and all other documents and materials in the possession
of and under the control of Licensee with respect to the
subject matter and terms of this Agreement. In the event a
sublicense is approved by Licensor as provided hereunder,
Licensee shall also obtain for Licensor the right in any and
all of such sublicenses for Licensor to similarly inspect the
books and records of the sublicensees. The exercise by
Licensor of any right to audit at any time or times or the
acceptance by Licensor of any statement, or payment shall be
without prejudice to any of Licensor's rights or remedies and
shall not bar Licensor from thereafter disputing the accuracy
of any payment or statement and Licensee shall remain fully
liable for any balance due under this Agreement.
5.6 TAXES. Licensee will bear all taxes, duties and
other governmental charges in the Territory relating to or
arising under this Agreement, including without limitation, any
income taxes (except withholding taxes on royalties), any stamp
or documentary taxes or duties, turnover, sales or use taxes,
value added taxes, excise taxes, customs or exchange control
duties or any other charges relating to or on, any royalty
payable by Licensee to Licensor. Licensor shall pay any income
tax whether imposed by the laws of the United States or a
United States state. Licensee shall obtain, at its own cost
and expense, all licenses, Reserve Bank, Commercial Bank or
other bank approvals, and any other documentation necessary for
the transmission of royalties and all other payments relevant
to Licensee's performance under this Agreement. If any tax or
withholding is imposed on royalties, Licensee shall obtain
certified proof of the tax payment or withholding and
immediately transmit it to Licensor.
-11-<PAGE>
5.7 UNDERPAYMENTS. If, upon any examination of
Licensee's books and records pursuant to Article 5.5 hereof,
Licensor shall discover any royalty underpayment by Licensee,
Licensee will make all payments required to be made to correct
and eliminate such underpayment within ten (10) days of
Licensor's demand. In addition, if said examination reveals a
royalty underpayment of * or more for any royalty period,
Licensee will within ten (10) days of demand reimburse Licensor
for the cost of said examination.
5.8 MANNER OF PAYMENT. All payments required by
Licensee hereunder shall be made to Licensor in Delaware in
U.S. Dollars, and all references to dollars throughout this
Agreement shall mean U.S. Dollars. The amount of payment shall
be calculated using the rate of foreign exchange in effect at
the Midland Bank PLC at the close of business on the date of
payment. In the event that Licensee is required to withhold
certain amounts for payment to the appropriate governmental
authorities, Licensee will supply to Licensor the official
receipts evidencing payment therefor.
5.9 INTEREST ON LATE PAYMENTS. In addition to any
other remedy available to Licensor, if any payment due under
this Agreement is delayed for any reason, interest shall accrue
and be payable, to the extent legally enforceable, on such
unpaid principal amounts from and after the date on which the
same became due, at a per annum equal to the lower of *
percentage points above the prime rate of interest in effect,
at the time the late payment was due, at Chase Manhattan Bank
in New York, New York, U.S.A. and the highest rate permitted by
law in New York.
5.10 NO SET-OFF. The obligation of Licensee to pay
royalties hereunder shall be absolute notwithstanding any claim
which Licensee may assert against Licensor. Licensee shall not
have the right to set-off, compensate or make any deduction
from such royalty payments for any reason whatsoever.
5.11 PURCHASES BY LICENSOR'S FLAGSHIP STORES.
Beginning on the first day of each of Licensee's market periods
(opening of each selling season), retail flagship stores in the
Territory owned by Licensor or one of its subsidiaries or
affiliates (the "Flagship Stores") may purchase Licensed
Product at no more than the *. Licensee agrees to fill the
orders of the Flagship Stores in at least the same manner which
Licensee fills orders from its other customers. In addition,
Flagship Stores may contract for special programs of Licensed
Product at a price equal to no more than the *. No royalty or
advertising payment shall be due on purchases of Licensed
Product (including Closeouts, Seconds or special programs) by
Flagship Stores and such purchases shall not be counted for
purposes of meeting any Minimum Sales Level.
5.12 FINANCIAL STATEMENTS. Licensee shall provide
Licensor (a) a certified, audited financial statement to be
delivered to Licensor within five (5) months after the end of
each fiscal year of Licensee and (b) a six (6) month interim
unaudited financial statement to be delivered to Licensor
within sixty (60) days after the end of the six (6) month
period. The year end financial information must be prepared by
a chartered accountant having no interest in Licensee's
business and approved
* This information has been omitted pursuant to a request
for confidential treatment filed with the Securities and
Exchange Commission.
-12-<PAGE>
by Licensor.
ARTICLE 6. REPRESENTATIONS AND WARRANTIES
6.1 WARRANTIES AND REPRESENTATIONS OF LICENSOR.
Licensor hereby represents, warrants and covenants that:
(a) it has the full right, power and authority
to enter into this Agreement and to license Licensee with
respect to all the rights granted hereunder;
(b) it is a corporation duly organized, validly
existing and in good standing under the laws of the
jurisdiction of its incorporation;
(c) necessary corporate acts have been effected
by it to render this Agreement valid and binding upon it; and
(d) in its negotiations relative to this
Agreement, it has not utilized the services of any finder,
broker or agent and it owes no commissions or fees to any such
person in relation hereto. Licensor agrees to indemnify
Licensee against, and hold it harmless from, any and all
liabilities (including, without limitation, reasonable
attorneys' fees) to any person, firm or corporation claiming
commissions or fees in connection with this Agreement or the
transactions contemplated hereby as a result of an agreement
with or services rendered to Licensor.
6.2 WARRANTIES AND REPRESENTATIONS OF LICENSEE.
Licensee hereby represents, warrants and covenants that:
(a) it has the full right, power and authority
to enter into this Agreement and to perform all of its
obligations hereunder;
(b) it is financially capable of undertaking
the business operations which it conducts and of performing its
obligations hereunder;
(c) it is a corporation duly organized, validly
existing and in good standing under the laws of the
jurisdiction of its incorporation;
(d) all necessary corporate acts have been
effected by it to render this Agreement valid and binding upon
it; and
(e) in its negotiations relative to this
Agreement, it has not utilized the services of any finder,
broker or agent and it owes no commission or fees to any such
person in relation hereto. Licensee agrees to indemnify
Licensor against, and hold it harmless from, any and all
liabilities (including, without limitation, reasonable legal
fees) to any person, firm or corporation
-13-<PAGE>
claiming commissions or fees in connection with this Agreement
or the transactions contemplated hereby as a result of an
agreement with or services rendered to Licensee.
ARTICLE 7. ADVERTISING
7.1 ADVERTISING. All advertising and promotion in
connection with Licensed Products, including cooperative
advertising whereby Licensee provide their customers with a
contribution be it in the form of actual monetary contribution,
credit or otherwise, shall be placed with an agency approved by
Licensor. Licensee will pay, advertising invoices directly as
they become due. Licensee agrees to use its best efforts to
advertise and promote the Licensed Products during each Annual
Period in order to make the Trademark a well known name within
the Territory and to maintain the high standards of the
Trademark.
7.2 ADVERTISING EXPENDITURE. Licensee agrees that,
during each of the First and Second Annual Periods, it shall
spend the greater of * dollars or * of the actual Net Sales,
and for each such Annual Period thereafter, shall spend the
greater of * of the Minimum Sales Level or * of the actual Net
Sales for each such Annual Period, for direct media advertising
of the Licensed Products not including any cooperative
advertising, trade shows, sampling, or any other promotional or
sales material normally produced for the sale of the Licensed
Products (the "Advertising Expenditure"). If in any Annual
Period the Advertising Expenditure has not been made, then
Licensee shall spend such amount for advertising within the
first ninety (90) days of the subsequent Annual Period. If the
Advertising Expenditure has not been expended by the end of
said ninety (90) day period, then the amount which should have
been expended and which was not expended shall be paid over to
Licensor to be used by Licensor for advertising the Trademark
provided, however, that if Advertising Expenditure has not been
made prior to the termination of this Agreement, the unexpended
Advertising Expenditure shall, within twenty (20) days, be paid
over to Licensor absolutely. Proof of expenditure shall be
submitted each quarter using the Advertising Expenditure Form
(Exhibit E).
7.3 APPROVAL OF PACKAGING, LABELING AND ADVERTISING.
No packaging, labeling or advertising, including cooperative
advertising may be used without the prior written approval of
Licensor. Before publication of any advertisement or
promotion, Licensee shall submit every element of the
advertisement or promotion to Licensor for approval using an
"Advertising Approval Form", as provided by Licensor. Any
approval granted hereunder shall be limited to use during the
Seasonal Collection of the Licensed Products to which such
advertising relates and shall be further limited to use (e.g.
television or print) for which approval by Licensor was
granted. Samples of initial packaging, labeling and
advertising, and samples of any revisions, changes,
modifications or substitutions thereof, shall be submitted to
Licensor sufficiently far in advance to permit Licensee time
to make such changes as Licensor shall deem necessary. All
requests for the approval of packaging, labeling or advertising
pursuant to this Article 7.3 shall be accompanied by at least
two (2) samples of the object for which approval is sought.
Licensee shall use its best efforts to ensure that all
advertising and promotional plans used by Licensee in
connection with the Trademark, in any
* This information has been omitted pursuant to a request
for confidential treatment filed with the Securities and
Exchange Commission.
-14-<PAGE>
form and in any medium, shall be consistent with the prestige
of the Trademark and the quality of the Licensed Products. All
packaging, labeling and advertising of Licensed Products shall
use the Trademark, but no other trademark or trade name shall
be used except as may be required by applicable law or
permitted by Licensor. Licensee shall not be permitted to use
their names on the Licensed Products, packaging and other
materials displaying the Trademark other than as specifically
approved by Licensor. Any advertising materials provided by
Licensor to Licensee shall be so provided at Licensee's cost
and the price therefor shall be Licensor's cost of producing
and providing the same.
7.4 USE OF TRADEMARK ON INVOICES, ETC. The use of
the Trademark by Licensee on invoices, order forms, stationery
and related matter and in advertising in telephone or other
directory listings is permitted only upon Licensor's prior
written approval of the format in which the Trademark is to be
so used, the juxtaposition of the Trademark with other words
and phrases, and the content of the copy prior to the initial
such use of the Trademark and prior to any material change
therein; provided, however, that each such use of the Trademark
is only in conjunction with the manufacture, sale, distribution
or advertisement of Licensed Products pursuant to this
Agreement.
7.5 LAUNCH. In addition to the Advertising Payments
required under Articles 7.1 and 7.2, Licensee agrees to host,
at Licensee's expense, a launch event or distribute a gift
package to the fashion and financial press and to major retail
accounts during the initial selling season for the first
Seasonal Collection to be sold under this Agreement. Such
event shall be comparable to similar launch events hosted by
Licensor's other licensees of the Trademark and shall
reasonably reflect the prestige of the Trademark and the
relative significance of Licensed Products to Licensor. In no
event shall Licensee be required to spend more than * dollars
on such launch event or gift package.
ARTICLE 8. QUALITY AND STANDARDS
8.1 DISTINCTIVENESS AND QUALITY OF THE TRADEMARK.
Licensee shall maintain the distinctiveness of the Trademark
and the image and high quality of the goods and merchandise
bearing the mark presently manufactured and sold by Licensor
and its other licensees, and the prestigious marketing of same
as hitherto and presently maintained by Licensor and its other
licensees. Licensee agrees that, with respect to all Licensed
Products manufactured or sold by it, the same will be of high
quality as to workmanship, fit, design and materials used
therein, and shall be at least equal in quality, workmanship,
fit, design and material to the samples of Licensed Products
submitted by Licensee and approved by Licensor pursuant to
Article 8.3 hereof. All manufacturing and production shall be
of a quality in keeping with the prestige of the Trademark. In
addition, Licensee acknowledges that in order to preserve the
goodwill attached to the Trademark, the Licensed Products
should be sold at prices and terms reflecting the prestigious
nature of the Trademark, and the reputation of the Trademark as
appearing on goods of high quality and reasonable price, it
being understood, however, that Licensor is not empowered to
fix or regulate the prices for which the Licensed Products are
to be sold, either at the wholesale or retail level.
* This information has been omitted pursuant to a request
for confidential treatment filed with the Securities and
Exchange Commission.
-15-<PAGE>
8.2 SHOPS, STORES, RETAIL OUTLETS. The Licensed
Products sold by Licensee may be sold only to those specialty
shops, department stores and retail outlets which carry high
quality and prestige merchandise and whose operations are
consistent with Licensor's reputation and its sales policies
and with the prestige of the Trademark and only to those
customers expressly approved by Licensor. Prior to the opening
of each selling season (and whenever Licensee shall wish to
sell Licensed Products to customers not previously approved by
Licensor), Licensee shall submit a written list of the proposed
customers to Licensor for Licensor's prior written approval,
which approval may be given or withheld at Licensor's sole
discretion, based upon whether it deems that the proposed
customer shall enhance the quality and prestige of the
Trademark. Licensor shall have the right to withdraw any such
approval on written notice to Licensee. Licensee shall not (a)
market or promote or seek customers for the Licensed Products
outside of the Territory; (b) establish a branch, wholly owned
by subsidiary, distribution or warehouse with inventories of
Licensed Products outside of the Territory; (c) sell or
distribute any Licensed Products to wholesalers, jobbers,
diverters, catalog vendors or any other entity which does not
operate retail stores exclusively; (d) sell the Licensed
Products directly to the public in retail stores; (e) use the
Licensed Products as giveaways, prizes or premiums, except for
promotional programs which have received the prior written
approval of Licensor; or (f) sell the Licensed Products to any
third party or Affiliate of Licensee or any of its directors,
officers, employees or any person having an equity
participation in or any other affiliation to Licensee, without
the prior written approval of Licensor. Licensee shall include
and shall enforce the following as a term and condition of sale
to all of its customers:
"Resale Restrictions. Buyer shall not directly
or indirectly distribute, market or sell the
Products to any party other than consumers or
end users without obtaining the prior written
consent of Seller."
8.3 SAMPLES OF MANUFACTURED PRODUCTS. Before
Licensee shall sell or distribute any Manufactured Products in
any Seasonal Collection, Licensee shall submit samples of each
of such Manufactured Products to Licensor for its prior written
approval, which approval may be withheld by Licensor in its
sole and absolute discretion. Any such request for approval
shall be submitted to Licensor on the form annexed hereto as
Exhibit C. Such samples shall be submitted sufficiently far in
advance to permit Licensee time to make such changes as
Licensor deems necessary. Any approval given hereunder shall
apply only to that Seasonal Collection for which it is
submitted to Licensor. Once samples have been approved,
Licensee will manufacture only in accordance with such approved
samples and will not make any changes for manufacture without
Licensor's prior written approval. All samples of Manufactured
Products submitted to Licensor pursuant to this Article 8.3
shall be provided at Licensee's sole cost and expense.
Licensee shall submit to Licensor a reasonable number of
additional samples of Manufactured Products upon Licensor's
reasonable request. No Manufactured Products (including
samples) shall be distributed and/or sold by Licensee pursuant
to this Agreement unless such Manufactured Products are in
substantial conformity with and at least equal in quality to
the samples previously approved by Licensor in accordance with
this Article 8.3.
8.4 NON-CONFORMING PRODUCTS. In the event that any
Licensed Product is, in the judgment of Licensor, not being
manufactured, distributed or sold with first quality
workmanship or
-16-<PAGE>
in strict adherence to all details and characteristics
furnished by Licensor, Licensor shall notify Licensee of the
specific nature of the problem in writing and Licensee shall
promptly repair or change such Licensed Product to conform
thereto. If a Licensed Product as repaired or changed does not
strictly conform after Licensor's request and such strict
conformity cannot be obtained after Licensee is given a
reasonable opportunity to do so, Licensor may direct that the
Trademark shall be promptly removed from the item. In such
event, the item may be sold by Licensee, provided such miscut
or damaged item does not contain any labels or other
identification bearing the Trademark without Licensor's prior
approval. Notwithstanding anything in this Article 8.4 to the
contrary, sales of all products of Licensor's design whether or
not bearing the Trademark, shall nonetheless be subject to
royalty payments pursuant to Article 5 hereof. Licensor may
purchase at Licensee's expense any Licensed Products found in
the marketplace which, in Licensor's judgment, are inconsistent
with approved quality standards and bill such costs to
Licensee. Licensee must pay all royalties due on sales of
nonconforming goods. Licensor may require Licensee to recall
any Licensed Products not consistent with approved quality
standards. Licensee shall use its best efforts to comply.
8.5 APPROVALS. All approvals required or permitted
by this Agreement must be in writing from Licensor to Licensee.
All matters requiring approval of Licensor or the exercise of
its discretion shall be at the sole subjective discretion of
Licensor. A submission for approval shall be deemed
disapproved unless Licensor delivers a notice of approval
within twenty (20) days. Licensor shall provide an explanation
for disapprovals. Licensor has no obligation to approve,
review or consider any item which does not strictly comply with
the required submission procedures provided that Licensor
designates the procedure which was not followed. Approval by
Licensor shall not be construed as a determination that the
approved matter complies with all applicable regulations and
laws. No disapproved item shall be manufactured, sold, used,
distributed or advertised. Licensee may revise any disapproved
item and resubmit it. Licensee must strictly comply with all
of Licensor's decisions. The parties will adjust the approval
forms as appropriate. Upon reasonable notice, Licensor may
withdraw approval of any previously approved item. In the
event that it is reasonably necessary for Licensor to do on-
site approvals, Licensee will pay any and all expenses and air-
fare incurred by Licensor with respect to such on-site
approvals.
8.6 APPROVAL WITHDRAWAL. If the style, appearance
or quality of any Licensed Product ceases to be acceptable to
Licensor, Licensor shall have the right in the exercise of its
sole discretion to withdraw its approval of such Licensed
Product. Upon receipt of written notice from Licensor of its
election to withdraw such approval, Licensee shall immediately
cease the use of the Trademark in connection with the
promotion, advertising, sale, manufacture, distribution or use
of such Licensed Product(s). Notice of such election by
Licensor to withdraw approval shall not relieve Licensee from
its obligation to pay royalties on sales of such Licensed
Product(s) made by Licensee to the date of disapproval or
thereafter as permitted. Licensee may, however, complete work
in process and utilize materials on hand provided that it
submits proof of such work in progress and fabric inventory to
Licensor.
8.7 SAMPLES, ARTWORK AND KNOW-HOW. Licensor shall,
at least four (4) times during each Annual Period, make
available to Licensee certain samples, designs, colors, fabric
-17-<PAGE>
samples, tags, labels, packaging and artwork available to
Licensor, and the cost of providing such materials shall be
borne by Licensee. All right, title and interest in and to
samples, sketches, designs, and other materials furnished to
Licensee by Licensor, whether created by Licensor or Licensee,
including any modifications or improvements thereof which may
be created by Licensor, Licensee are hereby assigned to and
shall be the sole property of Licensor as between Licensee and
Licensor and are licensed hereunder solely and exclusively for
use in connection with the manufacture and sale of Licensed
Products in the Territory. Licensor may use and permit others
to use said designs and other materials in any manner it
desires, provided that such use does not conflict with any
rights granted Licensee hereunder. Licensee specifically
acknowledges that such designs and other materials may be used
by Licensor and other licensees on Licensed Products in
jurisdictions outside the Territory and on products other than
Licensed Products anywhere in the world. In addition to the
foregoing, for marketing purposes, Licensor shall, upon
reasonable request, make available to Licensee, such of the
following which are available to Licensor: (a) reports on
marketing policy of Licensor; (b) reports on color, style and
fabric trends; (c) samples of advertising materials; (d)
display ideas; and (e) labels, hangtags and packaging.
8.8 CONFIDENTIALITY. Licensee acknowledges that it
will receive from Licensor prints, designs, ideas, sketches,
and other materials or Trade Secrets which Licensor intends to
use on or in connection with lines of merchandise other than
the Licensed Products and which have not as yet found their way
into the channels of distribution. The parties recognize that
these materials are valuable property of Licensor. Licensee
acknowledges the need to preserve the confidentiality and
secrecy of these materials and agrees to take all necessary
steps to ensure that use by it, or by its contractors will in
all respects preserve such confidentiality and secrecy.
Licensee shall take all reasonable precautions to protect the
secrecy of the materials, samples, and designs described in
this Article 8.8 prior to their commercial distribution or the
showing of samples for sale, and shall not sell any merchandise
employing or adapted from any of said designs except under the
Trademark. Licensor shall take all reasonable precautions to
protect the secrecy of the original designs created by Licensee
for Licensed Products prior to their advertisement, commercial
distribution or the showing of samples for sale. Neither
Licensor nor Licensee shall, at any time during the term of
this Agreement, disclose or use for any purpose, other than as
contemplated by this Agreement, any revealed or otherwise
acquired confidential information and data relating to the
business of the other.
8.9 MANUFACTURE OF LICENSED PRODUCTS BY THIRD
PARTIES.
(a) Licensee shall execute the attached
Exhibit G, within thirty (30) days from execution of this
Agreement evidencing that all Licensed Products manufactured
hereunder (whether by Licensee, Licensee's suppliers, or any
contract sewing shops or other designated contract facilities)
will be manufactured in compliance with the wage and hour laws
of the country of manufacture and without the use of child
(under the age of 14), prison or slave labor;
(b) Licensee shall not utilize any factory
(whether operated by a third party manufacturer or a third
party manufacturer's contract sewing shop or other designated
contract
-18-<PAGE>
facility) in the manufacture of Licensed Products (including
all components thereof) unless (a) it has been inspected and
approved, in writing, by an authorized employee or agent of
Licensee; (b) Exhibit G is executed by each such third party
manufacturer or a third party manufacturer's contract sewing
shop or other designated contract facility; and (c) Licensee
shall obtain the signature of an authorized representative from
each third party manufacturer used by Licensee on a brief
agreement designated to protect Licensor's rights in the
Trademark (see Exhibit D). Licensee acknowledges that it shall
remain primarily liable and completely obligated under all of
the provisions of this Agreement in respect of such
subcontracting arrangements.
(c) Licensee shall provide access to Licensor's
representative, upon reasonable notice, to (i) Licensee's
manufacturing facility and any manufacturing facility operated
by any third party manufacturer or such third party
manufacturer's contract sewing shops or other designated
contract facilities which are utilized for all or part of the
manufacture of Licensed Products, and (ii) all books and
records relating to employee wages, employee timecards,
evidence of employee age, shipping documents, cutting reports
and other documentation relating to the manufacture and
shipment of Licensed Products;
(d) Licensee acknowledges that it has in effect
(or will promptly develop) a program of monitoring
manufacturing facilities either operated by third party
manufacturers or any such third party manufacturers' contract
sewing shops or other designated contract facilities for
compliance with the requirements of Article 8.9(a) above; and
(e) Licensee shall exercise best efforts to
ensure that all shipping documents which accompany all Licensed
Products include the following language (either pre-printed or
"stamped"):
"We hereby certify that the merchandise covered by this
shipment was manufactured in compliance with all
applicable requirements of the wage and hour laws of the
country of manufacture and without the use of child (under
the age of 14), prison or slave labor. We further certify
that we have in effect a program of monitoring any
suppliers, contract sewing shops and other designated
contract facilities which manufactured Tommy Hilfiger
(Registered) brand merchandise for compliance with the
requirements set forth above. We also certify that this
shipment is in compliance with all laws applicable to the
designation of country of origin on products, accurately
states the country of origin on all products; the marking
of shipments with proper country of origin and shall be
shipped under legally issued and valid export licenses or
visas."
8.10 MARKING, LABELING AND PACKAGING IN ACCORDANCE
WITH APPLICABLE LAWS. All Licensed Products manufactured,
distributed or sold by Licensee shall be marked, labeled,
packaged, advertised, distributed and sold in accordance with
this Agreement, in accordance with all applicable laws, rules
and regulations in the Territory, and in such a manner as will
not tend to mislead or deceive the public. At the request of
Licensor, Licensee shall cause to be placed on all Licensed
Products appropriate notice designating Licensor as the
copyright or design patent owner thereof,
-19-<PAGE>
as the case may be.
8.11 DISPOSAL OF SECONDS AND CLOSE-OUTS.
(a) Seconds. Licensee shall only sell Licensed
Products which are Seconds in a way which shall not reduce the
value of the Trademark or detract from its reputation and shall
obtain the express prior written consent of Licensor with
respect to the terms and method of such disposal. All Seconds
approved for sale by Licensor shall be clearly marked "Seconds"
or "Irregular". The percentage of Seconds of any of the
Licensed Products which may be disposed of pursuant to this
Article 8.11(a) shall not, in any event, exceed * of the total
number of units of Licensed Products distributed or sold by
Licensee.
(b) Close-Outs. All Close-Outs shall be sold
only with Licensor's prior written approval, which Licensor may
withhold in its sole discretion, through retail outlets and
traditional and accepted dealers in such merchandise and upon
such terms and conditions as Licensee, in its reasonable
discretion, determines appropriate and shall not be sold to any
person which Licensee know, or have reason to know, will export
such Close-Outs from the Territory. The percentage of Close-
Outs of any of the Licensed Products which may be disposed of
pursuant to this Article 8.11(b) shall not, in any event,
exceed * of the total number of units of such Licensed Products
distributed or sold by Licensee in each Annual Period.
8.12 ASSISTANCE BY LICENSOR. Licensee shall have
the right to cause its personnel to reasonably visit Licensor's
offices, factories, showroom, and other places of business, and
also to attend Licensor's sales meetings in order to obtain
additional know-how and assistance. The scheduling of such
visits shall be at times mutually convenient to the parties
hereto. In connection with such visits, Licensee shall bear
all air-fare to and from, and subsistence expenses of
Licensee's representatives. In the event Licensee requests Mr.
Tommy Hilfiger or any other member(s) of Licensor's staff to
make a personal appearance, to attend any function, to visit
Licensee's manufacturing plants or facilities or to attend any
design meetings, Licensee shall pay all of the reasonable
expenses in connection therewith, including air travel and
hotel accommodations, and other reasonable services of
Licensor's choosing. Licensee shall reimburse Licensor for all
reasonable expenses so incurred by Licensor at Licensee's
request.
8.13 MEETINGS. Licensor may from time to time but
no more than twice a year hold a meeting of Licensor's
licensees/distributors. Licensee agrees upon receipt of
reasonable notice to attend any such meeting(s) at its own
expense.
8.14 DESIGN RIGHTS. Licensee acknowledges and
agrees that Licensor owns or shall own all design rights
relating to the Licensed Products, regardless of whether such
designs were created by Licensor or by or on behalf of
Licensee. Licensee agrees to make, procure and execute all
assignments necessary to vest ownership of design rights in
Licensor. Licensee shall place appropriate notices, reflecting
ownership of design rights by Licensor, on all the Licensed
Products, packaging, tags, labels and advertising and
promotional materials. Licensee shall not do or allow to
* This information has been omitted pursuant to a request
for confidential treatment filed with the Securities and
Exchange Commission.
-20-<PAGE>
be done anything which may adversely affect any of Licensor's
design rights. All designs used by Licensee for the Licensed
Products shall be used exclusively for the Licensed Products
and may not be used under any other trademark or private label
without the prior written consent of Licensor. Licensee shall
disclose and freely make available to Licensor any and all
developments or improvements it may make relating to the
Licensed Products and to their manufacture, promotion and
sales, including, without limitation, developments and
improvements in any machine, process or product design, that
may be disclosed or suggested by Licensor or regarding any
patent or trademark which Licensee is entitled to utilize.
8.15 PRICING. Licensee acknowledges that in order
to preserve the goodwill attached to the Trademark, the
Licensed Products should be sold at prices and terms reflecting
the prestigious nature of the Trademark, it being understood,
however, that Licensor is not empowered to fix or regulate the
prices for which the Licensed Products are to be sold, either
at the wholesale or retail level.
ARTICLE 9. THE TRADEMARK
9.1 RIGHTS TO THE TRADEMARK. Licensee acknowledges
the great value of the goodwill associated with the Trademark.
Licensee will not, at any time, do, or otherwise suffer to be
done any act or thing which may, in any way, adversely affect
any rights of Licensor in and to the Trademark or any
registrations thereof or which, directly or indirectly, may
reduce the value of the Trademark or detract from its
reputation. Nothing contained in this Agreement shall be
construed as an assignment or grant to Licensee of any right,
title or interest in or to the Trademark, or any of Licensor's
other trademarks, it being understood that all rights relating
thereto are reserved by Licensor, except for the License
hereunder to Licensee of the right to use and utilize the
Trademark only as specifically and expressly provided herein.
Licensee shall not file or prosecute a trademark or service
mark application or applications to register the Trademark in
respect of the Licensed Products or any other goods or
services. Licensee shall not, during the term of this
Agreement or thereafter, (a) attack Licensor's title or right
in and to the Trademark in any jurisdiction or attack the
validity of this License or the Trademark or (b) contest the
fact that Licensee's rights under this Agreement (i) are solely
those of a manufacturer and distributor and, (ii) subject to
the provisions of Article 11 hereof, cease upon termination of
this Agreement. The provisions of this Article 9.1 shall
survive the termination of this Agreement.
9.2 PROTECTING THE TRADEMARK. Licensee shall
cooperate fully and in good faith with Licensor for the purpose
of securing, preserving and protecting Licensor's rights in and
to the Trademark. At the request of Licensor, Licensee shall
execute and deliver to Licensor any and all documents and do
all other acts and things which Licensor deems necessary or
appropriate to make fully effective or to implement the
provisions of this Agreement relating to the ownership or
registration of the Trademark.
9.3 COMPLIANCE WITH LEGAL REQUIREMENTS. Licensee
will use the Trademark in the Territory strictly in compliance
with the legal requirements therein. Whenever any Trademark is
used
-21-<PAGE>
on any item of packaging or labeling or in any advertisement,
it must be followed, in the case of a registered trademark by
the registration symbol, i.e., (Registered), and in the case of
all other trademarks by the symbol TM, or other appropriate
symbols of similar import acceptable to Licensor. Licensee
shall duly display all other notices with respect to the
Trademark, on the Licensed Products and otherwise, as are or
may be required by the trademark laws and regulations
applicable within the Territory. Upon expiration or
termination of this Agreement for any reason whatsoever,
Licensee will execute and deliver to Licensor any and all
documents required by Licensor terminating any and all
trademark registrations, Registered User agreements and other
documents regarding this Trademark.
9.4 OWNERSHIP OF COPYRIGHT. Any copyright which may
be created under this Agreement in any sketch, design, print,
package, label, tag or the like designed or approved or used
with the Trademark by Licensor will be the property of
Licensor. Licensee will not, at any time, do, or otherwise
suffer to be done, any act or thing which may adversely affect
any rights of Licensor in such sketches, designs, prints,
packages, labels, tags and the like and will, at Licensor's
request, do all things reasonably required by Licensor to
preserve and protect said rights.
9.5 NOTICE OF INFRINGEMENT. Licensee shall notify
Licensor in writing of any infringement or imitation of the
Trademark or the use by any person of any trademarks or
tradenames confusingly similar to the Trademark promptly as
same may come to the attention of Licensee. Licensor will
thereupon take such action as it deems advisable for the
protection of the Trademark and its rights therein, and
Licensee shall assist Licensor in the prosecution of any such
suit, as Licensor may reasonably request, at Licensor's
expense. In no event, however, will Licensor be required to
take any action if it deems it inadvisable to do so and
Licensee will have no right to take any action with respect to
the Trademark without the prior written consent of Licensor.
In the event a third party infringes the use of the Trademark
in the Territory on items similar to the Licensed Products,
Licensor shall take all advisable and necessary measures to
protect the Trademark and Licensee agrees that, at Licensor's
request, it will pay * of the costs incurred therefor,
including judicial expenses and legal fees.
9.6 COUNTERFEIT PROTECTION. Licensee shall use its
best efforts to prevent counterfeiting of the Licensed
Products. All Licensed Products shall bear and use any
reasonable counterfeit preventive system, devices or labels
designated by Licensor. At its option, Licensor may supply the
system, devices or labels (provided that they are supplied on a
timely basis), which Licensee must use and for which Licensee
shall pay all reasonable costs in advance.
9.7 USE OF OTHER TRADEMARKS. At all times while
this Agreement is in effect, neither Licensee, nor any company
affiliated with Licensee, owned or controlled by Licensee,
under common ownership with or having common stockholders as
Licensee, in which the owner of Licensee is a partner, or in
which Licensee is a partner, shall act as a licensee or
distributor in the Territory of any products included in
Article 1.12 under any name directly competitive with Licensor,
other than "Pepe Jeans" and its derivatives and related
trademarks, without the prior written approval of Licensor.
Nothing herein is to be construed so as to prohibit Licensee
from acting as a manufacturer only of such products under a
name competitive with Licensor, providing that Licensee shall
not be
* This information has been omitted pursuant to a request
for confidential treatment filed with the Securities and
Exchange Commission.
-22-<PAGE>
the licensee or distributor thereof. The design and style of
any such products or any of Licensee's private label products
must be clearly distinguished from the Licensed Products (the
foregoing shall be exclusive of any products previously
designed by Licensee or any of its Affiliates pursuant to other
license agreements in effect between Licensor and Licensee or
any of its Affiliates). If such consent is given, unless
prohibited by other agreements, Licensee shall provide Licensor
with samples of any clothing products, lines or collections
Licensee manufactures or has manufactured for it or distributed
for it which do not bear the Trademarks. A breach of this
clause shall constitute a violation of Licensee's obligation to
use its best efforts to exploit this license. The design,
merchandising, packaging, sales and display of all of
Licensee's non-licensed products shall be separate and distinct
from the Licensed Products. Licensee shall maintain a separate
area for exhibition of the Licensed Products wherever the
Licensed Products are sold.
9.8 USE OF TRADEMARK ON INVOICES, ETC. The use of
the Trademark by Licensee on invoices, order forms, stationery
and related materials in advertising in telephone or other
directory listings is permitted only upon Licensor's prior
written approval of the format in which the Trademark is to be
so used, the juxtaposition of the Trademark with other words
and phrases, and the content of the copy prior to the initial
such use of the Trademark and prior to any material change
therein; provided, however, that each such use of the Trademark
is only in conjunction with the manufacture, sale, distribution
or advertisement of Licensed Products pursuant to this
Agreement.
9.9 MONITORING. Licensee shall actively monitor use
of the Trademark by Licensee and its customers and shall use
its best efforts to see that such use does not impair the image
or reputation heretofore or hereafter established by Licensor
for products bearing the Trademark; provided, however, that the
Licensee shall have no obligation to place any unlawful
restriction on its customers.
ARTICLE 10. INSOLVENCY
10.1 EFFECT OF PROCEEDING IN BANKRUPTCY, ETC. If
either party institutes for its protection or is made a
defendant in any proceeding under bankruptcy, insolvency,
reorganization or receivership law, or if either party is
placed in receivership or makes an assignment for benefit of
creditors or is unable to meet its debts in the regular course
of business, the other party may elect to terminate this
Agreement immediately by written notice to the other party
without prejudice to any right or remedy the terminating party
may have, including, but not limited to, damages for breach to
the extent that the same may be recoverable.
10.2 RIGHTS, PERSONAL. The license and rights
granted hereunder are personal to Licensee. No assignee for
the benefit of creditors, receiver, trustee in bankruptcy,
sheriff or any other officer or court charged with taking over
custody of Licensee's assets or business, shall have any right
to continue performance of this Agreement or to exploit or in
any way use the Trademark if this Agreement is terminated
pursuant to Articles 11.1 and 11.2, except as may be required
by law.
10.3 TRUSTEE IN BANKRUPTCY. Notwithstanding the
provisions of Article 10.2 above,
-23-<PAGE>
in the event that, pursuant to the applicable bankruptcy law
(the "Code"), a trustee in bankruptcy, receiver or other
comparable person, of Licensee, or Licensee, as debtor, is
permitted to assume this Agreement and does so and, thereafter,
desires to assign this Agreement to a third party, which
assignment satisfies the requirements of the Code, the trustee
or Licensee, as the case may be, shall notify Licensor of same
in writing. Said notice shall set forth the name and address
of the proposed assignee, the proposed consideration for the
assignment and all other relevant details thereof. The giving
of such notice shall be deemed to constitute an offer to
Licensor to have this Agreement assigned to Licensor or its
designee for such consideration, or its equivalent in money,
and upon such terms as are specified in the notice. The
aforesaid offer may be accepted by Licensor only by written
notice given to the trustee or Licensee, as the case may be,
within fifteen (15) days after Licensor's receipt of the notice
to such party. If Licensor fails to deliver such notice within
the said fifteen (15) days, such party may complete the
assignment referred to in its notice, but only if such
assignment is to the entity named in said notice and for the
consideration and upon the terms specified therein. Nothing
contained herein shall be deemed to preclude or impair any
rights which Licensor may have as a creditor in any bankruptcy
proceeding.
ARTICLE 11. TERMINATION
11.1 OTHER RIGHTS UNAFFECTED. It is understood and
agreed that termination by either party on any ground shall be
without prejudice to any other remedies which the terminating
party may have.
11.2 TERMINATION WITHOUT NOTICE. If any of the
following grounds for termination shall occur, this Agreement
shall thereupon forthwith terminate and come to an end without
any need for notice from Licensor:
(a) If Licensee shall make an unauthorized
disclosure of confidential information, Trade Secrets, or
materials given or loaned to Licensee by Licensor;
(b) If Licensee institutes proceedings seeking
relief under a bankruptcy act or any similar law, or otherwise
violates the provisions of Article 10.1 thereof;
(c) If Licensee transfers or agrees to transfer
substantially all of its property, its shares of stock or, this
Agreement in violation of Article 17 thereof;
(d) If Licensee shall sell unapproved
merchandise in violation of Article 8.3 hereof;
(e) If Licensee shall, without the prior
written consent of Licensor, use the Trademark in an
unauthorized or improper manner;
-24-<PAGE>
(f) If Licensee shall use the Trademark in
connection with another trademark or name; and/or
(g) If Licensee shall place or participate in
any advertising prohibited by Article 7.
11.3 TERMINATION WITH NOTICE. If Licensee breaches
any of its obligations under this Agreement, other than those
specified in Article 11.2 above, Licensor may terminate this
Agreement by giving Notice of Termination to Licensee.
Termination will become effective automatically unless Licensee
completely cures the breach within fifteen (15) days of the
giving of such Notice. Termination based upon Licensee's
failure to comply with the Minimum Sales Levels set forth in
Article 4.2 shall become effective thirty (30) days after the
giving of the Notice. If the notice relates to royalties or to
product quality, pending cure Licensee shall ship no Licensed
Products; if Licensee does ship, it shall automatically forfeit
its right to cure and the License shall be terminated. Upon
the giving of a Notice of Termination for the second time, for
any reason, Licensee shall no longer have the right to cure any
violation, and termination shall be effective upon the giving
of the Notice.
11.4 EFFECT OF TERMINATION. On the termination of
this Agreement for any reason whatsoever: all of the rights of
Licensee under this Agreement shall forthwith terminate and
immediately revert to Licensor; all royalties on sales
theretofore made shall become immediately due and payable;
Licensee shall forthwith discontinue all use of the Trademark,
except that Licensee may have a period of ninety (90) days
after such termination to consummate all sales of Licensed
Products which were firm upon the delivery of the Inventory
Schedule in accordance with Article 11.5 hereof and to sell the
balance of the Inventory not purchased by Licensor, and
royalties with respect thereto shall be due on such ninetieth
day. Licensor shall have the right to conduct a physical
inventory of the Licensed Products in Licensee's possession or
control. Licensee will completely remove the Trademark from
Licensed Products and destroy all hangtags and labeling
attached to such Licensed Products. Licensee shall, at
Licensee's expense, either return to Licensor all remaining
Inventory after such ninetieth (90th) day or destroy all
remaining Inventory under the supervision of Licensor.
Licensee shall no longer use the Trademark, any variation,
imitation or simulation thereof, or any Trademark similar
thereto; Licensee shall immediately take all necessary steps to
change its or any Affiliate's corporate name to omit any
reference to or use of the Trademarks; Licensee will promptly
transfer to Licensor, free of charge, all registrations,
filings and rights with regard to the Trademark which it may
have possessed at any time; and Licensee shall thereupon
deliver to Licensor, free of charge, all sketches, designs,
colors and the like in its possession or control, designed or
approved by Licensor, and all Labels supplied by Licensor in
Licensee's possession or control. Licensor shall have the
option, exercisable upon notice to Licensee within thirty (30)
days of termination, to negotiate the purchase of the Labels
which have not been supplied by Licensor. If such negotiations
do not result in the purchase of the Labels not supplied by
Licensor, Licensee shall destroy the Labels under the
supervision of Licensor, and Licensee, shall supply to Licensor
a certificate of destruction thereof signed by a duly
authorized officer of Licensee.
11.5 INVENTORY UPON TERMINATION. Upon the
termination of this Agreement for any
-25-<PAGE>
reason whatsoever, Licensee shall immediately deliver to
Licensor an Inventory Schedule. The Inventory Schedule shall
be prepared as of the close of business on the date of such
termination and shall reflect direct cost of each such item
(not including overhead or any general or administrative
expenses). Licensor thereupon shall have the option,
exercisable by notice in writing delivered to Licensee within
thirty (30) days after its receipt of the complete Inventory
Schedule, to purchase any or all of the Inventory for an amount
equal to the price as determined as follows: (i) as to
Manufactured Products, the price shall be Licensee's standard
cost (the actual manufacturing cost); and (ii) as to Purchased
Products, the price shall be Licensee's landed costs, which
shall, for the purposes hereof, mean the F.O.B. price together
with customs, duties, brokerage, freight and insurance. In the
event such notice is sent by Licensor, Licensor may collect the
Inventory referred to therein within ninety (90) days after
Licensor's said notice. Licensor will pay such Licensee for
such Inventory upon such collection. In the event such notice
is not sent, Licensee may dispose of the Licensed Products
within ninety (90) days of the date of termination; provided,
however, that any advertising used during such period shall be
subject to Licensor's prior written approval and such
disposition of the Licensed Products shall be subject to
Licensee's obligations hereunder, including, but not limited to
payments to be made to Licensor. At the end of such ninety
(90) day period, any Licensed Products remaining in Licensee's
possession shall, at the request of Licensor, be destroyed.
11.6 CONTRIBUTION FROM SEL. SEL International
Investments Corp. ("SEL"), hereby agrees to make (or cause a
subsidiary to make) capital contributions to Licensee in an
amount equal to at least * in the aggregate, over the first
three (3) Annual Periods. Licensee shall dedicate and,
promptly after the receipt of any portion of such
contributions, notify Licensor of the amount received and
utilize the total amount of such funds received for the support
and development of the business contemplated hereunder.
11.7 FREEDOM TO LICENSE. In the event of
termination of this Agreement or the receipt by Licensor of a
notice of termination from Licensee, Licensor shall be free to
license to others the use of the Trademark in connection with
the manufacture and sale of Licensed Products in the Territory,
but only if the sale of such Licensed Products in the Territory
produced pursuant to such third party agreement is prohibited
until after the termination of this Agreement.
11.8 EQUITABLE RELIEF. Licensor and Licensee shall
be entitled to equitable relief by way of temporary and
permanent injunction and such other and further relief as any
court with jurisdiction may deem just and proper.
11.9 TERMINATION WITHOUT PREJUDICE. Termination of
this Agreement pursuant to and conditions hereof shall be
without prejudice to the terminating party's other rights and
remedies at law or in equity
11.10 WAIVER. It is expressly understood that under
no circumstances shall Licensee be entitled, directly or
indirectly, to any form of compensation or indemnity from
Licensor as a consequence to the termination of this Agreement,
whether as a result of the passage of time, or as the result of
any other cause of termination referred to in this Agreement.
Without limiting the
* This information has been omitted pursuant to a request
for confidential treatment filed with the Securities and
Exchange Commission.
-26-<PAGE>
generality of the foregoing, by its execution of the present
Agreement, Licensee hereby waives any claim which it has or
which it may have in the future against Licensor arising from
any alleged goodwill created by the Licensee for the benefit of
the said parties or from the alleged creation or increase of a
market for Licensed Products.
ARTICLE 12. RELATIONSHIP BETWEEN THE PARTIES
12.1 NO AGENCY. Licensee shall not represent itself
as the agent or legal representative of Licensor, Licensor's
affiliates or Tommy Hilfiger for any purpose whatsoever and
shall have no right to create or assume any obligation of any
kind, express or implied, for or on behalf of them in any way
whatsoever. Licensor shall similarly not represent itself as
the agent or legal representative of Licensee.
ARTICLE 13. INTENTIONALLY OMITTED
ARTICLE 14. BENEFIT
14.1 BENEFIT. This Agreement shall inure to the
benefit of and be binding upon the parties hereto, and, subject
to Article 17 hereof, their successors and assigns.
ARTICLE 15. ENTIRE AGREEMENT; AMENDMENT
15.1 ENTIRE AGREEMENT; AMENDMENT. This Agreement
constitutes the entire agreement of the parties hereto with
respect to the subject matter hereof and this Agreement may not
be amended or modified, except in a writing signed by both
parties hereto.
ARTICLE 16. NON-WAIVER
16.1 NON-WAIVER. The failure of either party to
enforce at any time any term, provision or condition of this
Agreement, or to exercise any right or option herein, shall in
no way operate as a waiver thereof, nor shall any single or
partial exercise preclude any other right or option herein; and
no waiver whatsoever shall be valid unless in writing, signed
by the waiving party, and only to the extent herein set forth.
ARTICLE 17. ASSIGNMENT
17.1 NO ASSIGNMENT WITHOUT CONSENT. The license and
rights granted to Licensee hereunder are personal in nature,
and Licensee may not and shall not sell, transfer, lease,
sublicense
-27-<PAGE>
or assign this Agreement or its rights and interest hereunder,
or any part hereof, by operation of law or otherwise, without
the prior written consent of Licensor, which consent may be
withheld by Licensor in its sole and absolute discretion,
except that Licensee shall have the right, upon written notice
to Licensor, to assign or sublicense this Agreement to
Affiliates of Licensee; provided, however, that in such event
Licensee agrees to guarantee the performance and obligations of
such corporation, subsidiary or Affiliate under this Agreement.
17.2 SALE OF ASSETS. A sale or other transfer of
all or substantially all of the assets of Licensee or a change
in the control of Licensee other than as permitted under
Article 17.1 shall be deemed an assignment of Licensee's rights
and interests under this Agreement to which the terms and
conditions of Article 17.1 of this Agreement shall apply.
17.3 SALE OF STOCK/INTEREST. Any transfer, by
operation of law or otherwise, of Licensee's interest in this
Agreement (in whole or in part), a fifty (50%) percent or
greater interest in one or in a series of transactions in
Licensee (whether stock, partnership, interest or otherwise) or
any interest directly or indirectly to a competitor of Licensor
shall be deemed an assignment of Licensee's rights and interest
under this Agreement to which the terms and conditions of
Article 17.1 of this Agreement shall apply. The issuance of
shares of stock to other than the existing shareholders or
their affiliates is deemed to be a transfer of that stock for
purposes of this Article. If after the date hereof, there is a
transfer of less than a fifty (50%) percent interest in
Licensee to a non Affiliate of Licensee, then any other
transfer of an interest in Licensee to a non Affiliate of
Licensee which when added to the total percentage previously
transferred totals a transfer of greater than fifty (50%)
percent interest of Licensee, shall be deemed an assignment of
Licensee's interest in this Agreement within the meaning of
this Article to which the terms and conditions of Article 20.1
shall apply.
17.4 ASSIGNMENT BY LICENSOR. Licensor shall have a
complete and unrestricted right to sell, transfer, lease or
assign its rights and interests in this Agreement to any
domestic or foreign corporation or other business entity,
providing that such transferee agrees to be bound by all of the
terms hereof and is the holder of the Trademark in the
Territory. When Licensor wishes to sell, transfer, lease or
assign its rights and interests in this Agreement, Licensor
shall do so on notice to Licensee.
ARTICLE 18. INDEMNIFICATION AND INSURANCE
18.1 INDEMNIFICATION BY LICENSEE. Licensee does
hereby indemnify and hold harmless Licensor, Tommy Hilfiger,
and their directors, officers, employees, agents, officials and
related companies from and against any and all losses,
liability, damages and expenses (including reasonable
attorneys' fees and expenses) which they or any of them may
incur or be obligated to pay in any action, claim or proceeding
against them or any of them, for or by reason of any acts,
whether of omission or commission, that may be committed or
suffered by Licensee or any of their servants, agents or
employees in connection with Licensee's performance of this
Agreement, including but not limited to:
-28-<PAGE>
18.1.1. any alleged defect in any Licensed
Product, regardless of whether the action is based upon
negligence or strict liability, and regardless of whether the
alleged negligence of Licensor is characterized as "passive" or
"active";
18.1.2. the manufacture, labeling, sale,
distribution or advertisement of any Licensed Product by
Licensee;
18.1.3. any violation of any warranty,
representation or agreement made by Licensee pertaining to a
Licensed Product;
18.1.4. the claim of any broker, finder or
agent in connection with the making of this Agreement or any
transactions contemplated by this Agreement.
The provisions of this Article and Licensee's obligations
hereunder shall survive any termination or rescission of this
Agreement.
18.2 NOTICE OF SUIT OR CLAIM. Licensee shall
promptly inform Licensor by written notice of any suit or claim
against Licensee relating to Licensee's performance under this
Agreement, whether such suit or claim is for personal injury,
involves alleged defects in the Licensed Products manufactured,
sold or distributed hereunder, or otherwise.
18.3 INDEMNIFICATION BY LICENSOR. Licensor does
indemnify and hold harmless Licensee, against any and all
liabilities, damages and expense (including reasonable
attorneys' fees, costs and expenses) which Licensee may incur
or be obligated to pay in any action or claim against Licensee
for infringement of any other person's claimed right to use a
trademark in the Territory, but only where such action or claim
results from Licensee's use of the Trademark in the Territory
in accordance with the terms of this Agreement and where
Licensee is not at fault. Licensee shall give Licensor prompt
written notice of any such claim or action, and thereupon
Licensor shall undertake and conduct the defense of any suit so
brought. It is understood, however, that if there is a dispute
between Licensor and Licensee as to whether the suit was
brought as a result of Licensee's failure to use the mark in
accordance with the terms of this Agreement, Licensee may be
required to conduct such defense unless and until it is
determined that no such misuse of the Trademark occurred and
that Licensee are not at fault. In the event appropriate
action is not taken by Licensor within thirty (30) days of its
receipt of notice from Licensee, Licensee shall have the right
to defend such claim or action in its own name, but no
settlement or compromise of any such claim or action may be
made without the prior written approval of Licensor. In either
case, Licensor and Licensee shall keep each other fully advised
of all developments and shall cooperate fully with each other
and in all respects in connection with any such defense is
made. Such indemnification shall be deemed to apply solely to
the amount of the judgment, if any, against Licensee, and sums
paid by Licensee in connection with its defense. Such
indemnification shall not apply to any damages sustained by
Licensee by reason of such claimed infringement other than
those specified above. The provisions of this Article and
Licensor's obligations hereunder shall survive any termination
or rescission of this Agreement.
-29-<PAGE>
18.4 INSURANCE.
(a) Requirements. Without limiting Licensee's
liability pursuant to the indemnity provisions of this
Agreement, Licensee shall maintain commercial general liability
insurance in the amount of at least * (combined single limit
per occurrence) with a broad form property damage liability
coverage. This insurance shall include broad form blanket
contractual liability, personal injury liability, advertising
liability, products and completed operations liability. Each
coverage shall be written on an "occurrence" form.
(b) Theft and Destruction Coverage. Licensee
shall purchase insurance against theft and destruction of the
Licensed Products which shall (1) be written on an "all risk"
basis; (2) provide that Licensee shall be reimbursed for loss
in an amount equal to the manufacturer's selling price for the
products (this may be accomplished by either a selling price
endorsement or business interruption insurance); (3) provide
that Licensor is added as a loss payee in respect to losses to
Licensed Products as their interests may appear; (4) be in
effect while goods are on premises owned, rented or controlled
by Licensee and while in transit or storage; and (5) include a
brand and label clause stating, among other things, that the
insurer will pay the cost of removing Licensor's name from
damaged merchandise and relabeling goods.
(c) General Provisions. The insurance
described in subArticles 18.4(a) and 18.4(b) shall include:
(1) an endorsement stating that Licensor shall receive at least
thirty (30) days written notice prior to cancellation or non-
renewal of coverage; (2) an endorsement naming Licensor as an
additional insured; and (3) a mutual waiver of subrogation for
insured property losses.
(d) Approved Carrier/Policy Changes. All
insurance shall be obtained from an insurance company approved
by Licensor which approval shall not be unreasonably withheld.
Licensee shall give at least thirty (30) days prior written
notice to Licensor of the cancellation of, or any modification
in, such insurance policy that would affect Licensor's status
or benefits thereunder. This insurance may be obtained for
Licensor by Licensee in conjunction with a policy which covers
products other than the Licensed Products.
(e) Evidence of Coverage. No later than thirty
(30) days from the effective date hereof, Licensee shall
furnish to Licensor evidence, in form and substance
satisfactory to Licensor, of the maintenance and renewal of the
required insurance including, but not limited to, copies of
policies with applicable riders and endorsements, and
certificates of insurance.
(f) Territory. The insurance set forth in this
Section must cover all countries in the Territory in which
Licensee sells or manufactures Licensed Products.
ARTICLE 19. SEVERABILITY
19.1 SEVERABILITY. If any provision or any portion
of any provision of this Agreement
* This information has been omitted pursuant to a request
for confidential treatment filed with the Securities and
Exchange Commission.
-30-<PAGE>
shall be construed to be illegal, invalid, or unenforceable,
such shall be deemed stricken and deleted from this Agreement
to the same extent and effect as if never incorporated herein,
but all other provisions of this Agreement and any remaining
portion of any provision which is not deemed illegal, invalid
or unenforceable in part shall continue in full force and
effect.
ARTICLE 20. NOTICES
20.1 NOTICES. All reports, approvals and notices
required or permitted to be given under this Agreement shall,
unless specifically provided otherwise in this Agreement, be
deemed to have been given if personally delivered or if mailed
by certified or registered mail,
if to Licensor, to: TOMMY HILFIGER LICENSING, INC.
913 N. Market Street
Wilmington, Delaware 19801
Attention: Mr. Joel Horowitz
President
Copy to: Steven R. Gursky, Esq.
Gursky & Associates, P.C.
21 East 40th Street
New York, New York 10016
and if to Licensee, to: PEPE JEANS LONDON CORPORATION
11 Lower Square
Old Isleworth
Middlesex
United Kingdom TW76BN
Attention: Sydney R. Neil
Group Chief Financial Officer
The parties may change their address for receipt of notices at
any time upon notice to the other party.
ARTICLE 21. SUSPENSION OF OBLIGATIONS
21.1 SUSPENSION OF OBLIGATIONS. If Licensee shall
be prevented from performing any of its obligations because of
governmental regulation or order, or by strike, civil unrest or
war, declared or undeclared, or other calamities such as fire,
flood, hurricane, tornado, earthquake, or similar acts of God,
or because of other similar or dissimilar cause beyond the
control of Licensee,
-31-<PAGE>
Licensee's obligations shall be suspended during the period of
such conditions. If such condition continues for a period of
more than sixty (60) days, Licensor shall have the right to
terminate this Agreement. If the act of force majeure consists
of a fire, flood, hurricane, tornado, earthquake or nuclear war
and if the act prevents Licensee from manufacturing and/or
timely delivering the Licensed Products, whether due to an
inability to obtain fabric or other materials, destruction of
manufacturing facilities, inability to deliver finished
product, or otherwise, Licensee shall have a period of not to
exceed ninety (90) days to find alternate sources and Licensee
shall advise Licensor on a weekly basis of the progress it has
made in that regard. If, in Licensor's reasonable opinion,
Licensee shall fail to diligently proceed to obtain alternate
sources, or if the condition shall continue to exist for a
period of ninety (90) days, Licensor shall have the right to
terminate this Agreement.
ARTICLE 22. EXHIBITS
22.1 EXHIBITS. All Exhibits are incorporated into
this Agreement. The forms of Licensor may be revised by
Licensor at any time.
ARTICLE 23. OTHER PROVISIONS
23.1 HEADINGS. The headings of the Articles and
Articles of this Agreement are for convenience only and in no
way limit or affect the terms or conditions of this Agreement.
23.2 COUNTERPARTS. This Agreement may be executed
in two (2) or more counterparts, each of which shall be deemed
an original, but all of which together shall constitute one and
the same instrument.
23.3 CONSTRUCTION. This Agreement shall be
interpreted and construed in accordance with the laws of the
State of New York with the same force and effect as if fully
executed and to be performed therein.
23.4 JURISDICTION. The parties hereby consent to
the jurisdiction of the United States District Court for the
Southern District of New York and of any of the courts of the
State of New York in any dispute arising under this Agreement
and agree further that service of process or notice in any such
action, suit or proceeding shall be effective if in writing and
delivered in person or sent as provided in Article 20.1 hereof.
23.5 COMPLIANCE WITH LAWS. Licensee shall comply
with all laws, rules, regulations and requirements of any
governmental body which may be applicable to the operations of
Licensee contemplated hereby, including, without limitation, as
they relate to the manufacture, distribution, sale or promotion
of Licensed Products, notwithstanding the fact that the
Licensor may have approved
-32-<PAGE>
such item or conduct.
IN WITNESS WHEREOF, the parties have executed this
Agreement.
TOMMY HILFIGER LICENSING, INC.
By: /s/ Virginia M. Cleary
Title: Assistant Secretary
PEPE JEANS LONDON CORPORATION
By: /s/ Lawrence S. Stroll
Title: Group CEO
SEL INTERNATIONAL INVESTMENTS CORP.,
as to Article 11.6 only
By: /s/ Lawrence S. Stroll
Title: Director
-33-<PAGE>
TOMMY HILFIGER LICENSING, INC.
TRADEMARK REGISTRATIONS
IN CLASS 25
REGISTRATION/
COUNTRY TRADEMARK APPLICATION NUMBER
Austria TOMMY HILFIGER 131.765
FLAG LOGO DESIGN 131.766
CREST DESIGN 137.606
TOMMY JEANS 144.359
Benelux
(Belgium, Holland,
Luxembourg) TOMMY HILFIGER 426,561
429,870
426,561
587,912
524,087
FLAG LOGO DESIGN 425,504
G/M91341-2/AUD
525,311
CREST DESIGN 492,977
542,161
TOMMY JEANS 504,923
551,020
Czech Republic TOMMY HILFIGER 170820
FLAG LOGO DESIGN 170821
CREST DESIGN 171263
TOMMY JEANS 173586<PAGE>
REGISTRATION/
COUNTRY TRADEMARK APPLICATION NUMBER
Denmark TOMMY HILFIGER VR01.175-1988
VR04.173-1988
FLAG LOGO DESIGN VR07.690-1989
CREST DESIGN VR08.882-1991
Finland TOMMY HILFIGER 102733
104075
134970
FLAG LOGO DESIGN 107592
4074/95
CREST DESIGN 120879
TOMMY JEANS 126874
France TOMMY HILFIGER 1.362.238
1.460.956
FLAG LOGO DESIGN w/
words "TOMMY HILFIGER" 93.470.085
FLAG LOGO DESIGN 1.460.958
CREST DESIGN 1.659.719
TOMMY JEANS 1.688.331
Germany TOMMY HILFIGER 1109376
1161454
39522688.0
2.061.836
FLAG LOGO DESIGN w/
words "TOMMY HILFIGER" 39523559.6
FLAG LOGO DESIGN 1161455<PAGE>
REGISTRATION/
COUNTRY TRADEMARK APPLICATION NUMBER
Germany (ctd.) CREST DESIGN 2008483
TOMMY JEANS H66049/25W2
Greece TOMMY HILFIGER 83.364
89.451
FLAG LOGO DESIGN w/
words "TOMMY HILFIGER" 118.811
FLAG LOGO DESIGN 89.449
CREST DESIGN 103.364
TOMMY JEANS 105.727
Hungary TOMMY HILFIGER H133030
FLAG LOGO DESIGN H133031
CREST DESIGN H133029
TOMMY JEANS H133898
Iceland TOMMY HILFIGER 601/1991
FLAG LOGO DESIGN 600/1991
CREST DESIGN 598/1991
TOMMY JEANS 1186/1991
Ireland TOMMY HILFIGER 122464
FLAG LOGO DESIGN 158780<PAGE>
REGISTRATION/
COUNTRY TRADEMARK APPLICATION NUMBER
CREST DESIGN 143279
TOMMY JEANS 148793
Israel TOMMY HILFIGER 79086
FLAG LOGO DESIGN 79085
CREST DESIGN 79088
TOMMY JEANS 80839
Italy TOMMY HILFIGER 470291
506426
FLAG LOGO DESIGN 506424
MI94C000342
CREST DESIGN 622481
TOMMY JEANS 626341
Norway TOMMY HILFIGER 132363
FLAG LOGO DESIGN 136584
CREST DESIGN 157091
TOMMY JEANS 154338
Poland TOMMY HILFIGER 72050
FLAG LOGO DESIGN 73614
CREST DESIGN 73615
TOMMY JEANS 75145
<PAGE>
REGISTRATION/
COUNTRY TRADEMARK APPLICATION NUMBER
Portugal TOMMY HILFIGER 237882
FLAG LOGO DESIGN 241862
301840
CREST DESIGN 271390
TOMMY JEANS 276421
Slovenia TOMMY HILFIGER 9180345
FLAG LOGO DESIGN w/
words "TOMMY HILFIGER" 9180346
CREST DESIGN 9180344
TOMMY JEANS 9181742
Spain TOMMY HILFIGER 1.148.653/8
FLAG LOGO DESIGN w/
words "TOMMY HILFIGER" 01.773.419/1
FLAG LOGO DESIGN 01.729.292/1
CREST DESIGN 1.618.567
TOMMY JEANS 1.654.164
Sweden TOMMY HILFIGER 207346
258267
FLAG LOGO DESIGN 211267
265070
257924
CREST DESIGN 235386
TOMMY JEANS 247080<PAGE>
REGISTRATION/
COUNTRY TRADEMARK APPLICATION NUMBER
Switzerland TOMMY HILFIGER 384775
384754
FLAG LOGO DESIGN 384808
430951
CREST DESIGN 1431/96
388767
1431/96
TOMMY JEANS 392373
Ukraine TOMMY HILFIGER 94061933/T
FLAG LOGO DESIGN 94061934/T
CREST DESIGN 94061935/T
TOMMY JEANS 94061937/T
United Kingdom TOMMY HILFIGER 1576084
(England, Northern 1300553
Ireland, Scotland, Wales)
FLAG LOGO DESIGN w/ 2021519
words "TOMMY HILFIGER" 1297398
TOMMY JEANS 1473971
CMT (COMMUNITY TRADEMARK APPLICATIONS)
TOMMY HILFIGER NOT YET PROVIDED
FLAG LOGO DESIGN w/words "TOMMY HILFIGER" NOT YET PROVIDED
FLAG LOGO DESIGN NOT YET PROVIDED
CREST DESIGN NOT YET PROVIDED
TOMMY JEANS NOT YET PROVIDED
EXHIBIT A<PAGE>
TOMMY HILFIGER LICENSING, INC. STATEMENT OF ROYALTIES
FOR______________TO______________19__
(QUARTER)
LICENSEE NAME_________________________
LICENSEE ADDRESS______________________
______________________________________
LICENSEE PRODUCT(S)___________________
<TABLE>
----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
CUSTOMER INVOICE ITEM UNIT NUMBER GROSS LESS LESS LESS NET SALES NET ROYALTY
NAME NUMBER STYLE NO. WHOLESALE SOLD ALLOWANCES MARKDOWNS TRADE RETURNS AMOUNT
PRICE DISCOUNTS
DISCOUNTS
----------------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------------
TOTALS
SEND STATEMENT TO: TOMMY HILFIGER LICENSING, INC. I CERTIFY THAT THE
913 N. Market Street ABOVE IS ACCURATE
Wilmington, Delaware 19801
U.S.A.
SIGNATURE
</TABLE>
EXHIBIT B<PAGE>
TOMMY HILFIGER LICENSING, INC. Page______ of ________
Date__________________
FORM MUST BE SUBMITTED COMPLETE SUBMIT TO THE ATTENTION OF:
TOMMY HILFIGER LICENSING, INC.
25 WEST 39TH STREET
NEW YORK, NEW YORK 10018
SAMPLE APPROVAL FORM
(ALL SAMPLES SUBMITTED FOR APPROVAL MUST BE IN CORRECT FABRIC)
NAME OF LICENSEE ________________________________________________________
LICENSED PRODUCT ________________________________________________________
LICENSEE'S ADDRESS ______________________________________________________
SEASON ____________ STYLE NUMBER ______________ FABRICATION ____________
WHOLESALE PRICE _________________ COLORS ______________________________
SIZES ___________________________ FACTORY ______________________________
START TAKING ORDERS ____________________ END TAKING ORDERS _____________
START SHIP _____________________________ END SHIP ______________________
APPROVED ___________________ DISAPPROVED __________________
COMMENTS ________________________________________________________________
_________________________________________________________________________
_________________________________________________________________________
______________________________ ______________________________
SIGNATURE OF LICENSEE SIGNATURE OF LICENSOR
DATE RETURNED TO LICENSEE ______________________________________
EXHIBIT C<PAGE>
THIRD PARTY
MANUFACTURING
AGREEMENT
THIS AGREEMENT made this ___ day of ________ 1996, by
and between ____________________________________, a
____________ corporation, having an office at _________________
____________________________________ (hereinafter referred to
as the "Company") and __________________ having an office at
______________________________________ (hereinafter referred to
as the "Manufacturer").
W I T N E S S E T H :
WHEREAS the Manufacturer is engaged in the
manufacture of garments and/or other items of apparel;
WHEREAS, the Company wishes to contract with the
Manufacturer for manufacture of certain garments and/or other
items of apparel from time to time, which garments and/or other
items of apparel (the "Products") will bear the trademark Tommy
Hilfiger, the trade name Tommy Hilfiger, all related logos,
crests, emblems or symbols, and all combinations, form and
derivatives thereof as are from time to time used by the
Company or any of its affiliates, whether registered or
unregistered as shown in the attached Exhibit A (the
"Trademarks"); and
WHEREAS, the Company has been licensed by Tommy
Hilfiger Licensing, Inc. ("THLI"), a Delaware corporation, to
use the Marks. THLI is the owner of all rights, title and
interests in and to the Trademarks.
NOW, THEREFORE, in consideration of the mutual
covenants herein contained, the parties hereby agree as
follows:
1. THE PRODUCTS. Company and THLI have created
certain designs and patterns from which the Manufacturer will
create three dimensional samples. The Company shall advise the
Manufacturer if the samples meet the Company's quality
requirement within twenty-one (21) days of receipt. The
Manufacturer shall make any modifications to the samples as
required by the Company. Samples accepted by the Company shall
be designated as prototypes for the purposes of this Agreement.
2. TERM.
(a) The term of this Agreement shall be for ____
(__) year(s) commencing on the ____ day of __________, 1996 and
terminating on the ____ day of __________________.
EXHIBIT D<PAGE>
(b) In the event that the Manufacturer shall have
faithfully performed each and every obligation of this
Agreement during the Term referred to in Article 2(a) above,
then this Agreement shall automatically renew from month to
month commencing immediately upon expiration of the term,
unless either party has given the other thirty (30) days
written notice of its intention to terminate the Agreement.
3. MANUFACTURE.
(a) Manufacturer shall only produce the specific
number of products as requested by the Company and at no time
shall produce excess goods or overruns. Manufacturer shall not
sell any products bearing the Trademarks to any third parties
without the express written consent of the Company.
(b) Manufacturer shall manufacture the Products and
Packaging to conform in quality and specifications to the
prototypes as defined in Article 1 above and as outlined in the
Quality Assurance Manual developed by the Company.
(c) All Products and Packaging manufactured by
Manufacturer shall be delivered to locations specified by the
Company or directly to the Company, whichever the Company may
direct.
(d) Manufacturer shall not enter into any agreement
with any third party for the manufacture of the Products
without the prior written consent of the Company, which consent
may be withheld in the Company's sole discretion. In order to
maintain the Company's high standard of quality control and to
insure that appropriate measures are taken against
counterfeiting, the Manufacturer will advise the Company of the
following information prior to obtaining the Company's written
consent: (i) name and address of each proposed manufacturer;
(ii) type and style of the Products to be manufactured; (iii)
quantity of the Products to be manufactured; and (iv) any other
relevant information. The Manufacturer will also obtain the
signature of an authorized representative from each third
party manufacturer approved by the Company on an agreement, in
a form substantially similar to this Agreement, designated to
protect the THLI's rights in the Trademarks. The Manufacturer
acknowledges that it shall remain primarily liable and
completely obligated under all of the provisions of this
Agreement in respect of such subcontracting arrangement.
(e) Manufacturer shall adhere to all federal, state
and local laws which pertain to the manufacture of clothing and
apparel, including the Flammable Fabrics Act, as amended, and
regulations thereunder and Manufacturer guarantees, that with
regard to all products, fabrics or related materials used for
the manufacture of the Products, which are to be sold by the
Company for which flammability standards have been issued,
amended or continued in effect under the Flammable Fabrics Act,
as amended, reasonable and representative tests, as prescribed
by the Consumer Product Safety Commission have been performed
which show that the Products at the time of their shipment or
delivery conform to the above-referenced flammability standards
as are applicable.
EXHIBIT D<PAGE>
4. INSPECTION.
(a) Company shall have the right to send any
representative or agent to inspect Manufacturer's premises or
its subcontractors' premises to the extent the Manufacturer may
have subcontractors as provided in 3(c) above.
(b) Such rights of inspection shall include the
right to inspect, test, and take samples of the Products,
whether finished or semi-finished, at any time during the
manufacturing process.
(c) Company shall have the right to reject any
Products or Packaging as not meeting the standards described in
Article 1 above.
(d) Manufacturer shall not have the right to sell or
otherwise distribute any rejected Products or Packaging. All
such products shall be destroyed according to methods and
procedures provided by the Company.
5. NOTICES.
(a) Manufacturer warrants and represents that the
Trademarks will appear on all of the Products in the manner set
forth in the attached Exhibit A. The Trademarks shall appear
on the Packaging in the form shown in Exhibit A.
(b) No other trademarks or notices shall appear on
Products or Packaging without the Company's prior written
consent in each instance.
6. USE OF TRADEMARKS.
(a) Manufacturer shall not at any time use, promote,
advertise, display or otherwise commercialize the Trademarks or
any material utilizing or reproducing the Trademarks in a
manner that will adversely affect any rights of ownership of
the Company therein or in a manner that would derogate or
detract from its repute. Manufacturer shall not use the
Trademarks, in any manner whatsoever (including, without
limitation, for advertising, promotion and publicity purposes),
without obtaining the prior written approval of the Company.
(b) The Trademarks shall be used in the form as
shown in attached Exhibit A.
(c) The Company assumes no liability to Manufacturer
or third parties with respect to Manufacturer's use of the
Trademarks other than in strict conformity with the
specifications set forth in this Agreement.
(d) Manufacturer's use of the Trademarks on the
Products and/or Packaging shall
EXHIBIT D<PAGE>
inure to the benefit of the Company. Manufacturer shall take
any and all steps required by the Company and the law to
perfect the Company's rights therein.
7. PROPERTY OF OWNER.
(a) Manufacturer recognizes the great value of the
goodwill associated with the Trademarks and the identification
of the Products with the Trademarks and acknowledges that the
Trademarks and all rights therein and goodwill pertaining
thereto belong exclusively to the Company. Manufacturer
further recognizes and acknowledges that a breach by
Manufacturer of any of its covenants, agreements or other
undertakings hereunder will cause the Company irreparable
damage, which cannot be adequately remedied in damages in an
action at law, and may, in addition thereto, constitute an
infringement of the Company's rights in the Trademarks, thereby
entitling the Company to equitable remedies, costs and
reasonable attorney's fees.
(b) To the extent any rights in and to the
Trademarks are deemed to accrue to Manufacturer, Manufacturer
hereby assigns any and all such rights, at such time as they
may be deemed to accrue, including the related goodwill, to the
Company.
(c) Manufacturer shall (i) never challenge the
validity or the Company's ownership of the Trademarks or any
application for registration thereof, or any trademark
registration thereof and (ii) never contest the fact that
Manufacturer's rights under this Agreement are solely those of
a manufacturer and terminate upon expiration or termination of
this Agreement. Manufacturer shall, at any time, whether
during or after the term of the Agreement, execute any
documents reasonably requested by the Company to confirm the
Company's ownership rights. All rights in the Trademarks other
than those specifically granted herein are reserved by the
Company for its own use and benefit.
(d) Without limiting the generality of any other
provision of this Agreement, Manufacturer shall not (i) use the
Trademarks, in whole or in part, as a corporate or trade name
or (ii) join any name or names with the Trademarks so as to
form a new trademark. Manufacturer agrees not to register, or
attempt to register, the Trademarks in its own name or any
other name, anywhere in the world.
(e) All provisions of this Article shall survive the
expiration or termination of this Agreement.
8. TRADEMARK PROTECTION.
(a) In the event that Manufacturer learns of any
infringement or imitation of the Trademarks or of any use by
any person or entity of a trademark similar to the Trademarks,
it shall promptly notify the Company. The Company thereupon
shall take such action as it deems advisable for the protection
of its rights in and to the Trademark and, if requested to do
so by the Company, Manufacturer shall cooperate with the
Company in all respects. In no event, however, shall the
Company be required to take any action if it deems it
inadvisable to do so.
EXHIBIT D<PAGE>
(b) Company shall have the right to defend, at its
cost and expense, and with counsel of its own choice, any
action or proceeding brought against Manufacturer for alleged
trademark infringement arising out of Manufacturer's use of the
Trademarks in accordance with the provisions of this Agreement.
(c) Manufacturer shall cooperate with the Company in
the execution, filing and prosecution of any trademark,
copyright or design patent applications that the Company may
desire to file and for that purpose Manufacturer shall supply
to the Company from time to time such samples as may be
reasonably required.
(d) All provisions of this Article shall survive the
expiration or termination of this Agreement.
9. TRANSSHIPMENT. Manufacturer hereby acknowledges
the Company's strict policy against transshipment of the
Products. Transshipment includes any products sewn or
otherwise manufactured in one country and then shipped to the
United States with a second company's "country of origin"
labels and export licenses to avoid adverse trade restrictions
and import quotas. Transshipment can involve both the raw
materials used to manufacture the Products and the finished
Products. The Manufacturer further acknowledges that
transshipment in any form violates U.S. federal law and the
Company reserves the right to immediately terminate this
agreement according to the terms contained herein, upon receipt
of proof of transshipment of the Products by the Manufacturer.
10. SECONDS, THIRDS OR EXCESS GOODS. Manufacturer
shall not have the right to sell any Products or Packaging
which are determined to be seconds, thirds or are in excess of
the amount of the products requested by the Company. All
seconds or excess products, including trims, shall be purchased
by the Company at the reasonable fair market price.
Manufacturer shall not have the right to sell any thirds, which
shall be destroyed by Manufacturer, who shall supply a
Certificate of Destruction to the Company. The Company shall
have the right to inspect any seconds or excess products to
ensure that they comply with the terms of this Agreement.
11. STOLEN GOODS OR DAMAGED GOODS. Manufacturer
will provide the Company with immediate notice of any stolen
Products or damaged Products including Products that are in
production. With regard to damaged Products (i.e., Thirds),
Manufacturer shall not have the right to sell any damaged
Products and all damaged Products (i.e., Thirds) will be
destroyed by the Manufacturer. With regard to stolen Products,
Manufacturer shall cooperate with the Company with respect to
any action regarding the stolen Products.
12. DESIGN OWNERSHIP. All rights, including without
limitation, copyright, trade secret and design patent, to
designs for the Products including, without limitation,
artwork, prints patterns, package designs, labels advertising
or promotional materials or any other designs using or used on
or affixed thereto, and to any package design, bearing the
Trademarks shall be the property of the Company. All Products
manufactured from designs submitted by Manufacturer and
approved by the
EXHIBIT D<PAGE>
Company, shall bear the Trademarks.
13. CONFIDENTIALITY. During the term of this
Agreement and thereafter, each party shall keep strictly secret
and confidential any and all information acquired from the
other party hereto or its designee and shall take all necessary
precautions to prevent unauthorized disclosure of such
information. The Manufacturer acknowledges that it will
receive from the Company prints, designs, ideas, sketches, and
other materials which the Company intends to use on or in
connection with lines of merchandise which have not yet been
put into the channels of distribution. The parties recognize
that these materials are valuable property of the Company. The
Manufacturer acknowledges the need to preserve the
confidentiality and secrecy of these materials and agrees to
take all necessary steps to ensure that use by it or by its
employees and/or agents will in all respects preserve such
confidentiality and secrecy. The Manufacturer shall take all
reasonable precautions to protect the secrecy of the materials,
samples, and designs prior to their commercial distribution or
the showing of samples for sale, and shall not manufacture any
merchandise employing or adapted from any of said designs
except for the Company or its affiliates or designees.
14. FORCE MAJEURE.
(a) No failure or omission by either of the parties
to perform any of its obligations under this Agreement shall be
deemed a breach of this Agreement if such failure or omission
is the result of acts of God, war, riot, accidents, compliance
with any action or restriction of any government or agency
thereof, strikes or labor disputes, inability to obtain
suitable raw materials, fuel, power or transportation, or any
other factor or circumstance beyond the control of the party,
which is not attributable to the negligence of such party.
(b) Any suspension of performance by reason of this
Article shall be limited to the period during which such cause
of failure exists, but such suspension shall not affect the
running of the term of this Agreement. However, if the
suspension of performance by reason of this Article exceeds six
months, either party may give written notice of termination of
this Agreement.
15. MANUFACTURER'S WARRANTIES AND REPRESENTATIONS.
Manufacturer warrants and represents that:
(a) It has and will have throughout the Term of this
Agreement, the full power, authority and legal right to execute
and deliver, and to perform fully and in accordance with all of
the terms of, this Agreement.
(b) The entering of this Agreement by Manufacturer
does not violate any agreements, rights or obligations existing
between Manufacturer and any other person, entity, or
corporation.
(c) It is not engaged in and will not engage in any
activities which are in violation of
EXHIBIT D<PAGE>
any applicable Domestic, Foreign or International Laws, Rules
or Regulations, including without limitation Laws, Rules or
Regulations governing labor, the environment, the sale of
goods, U.S. Customs Laws or illegal transshipment. The Company
maintains a policy against engaging in any illegal activities
and will not buy or sell products provided throughout the use
of any unlawful or unethical practices.
16. THE COMPANY'S WARRANTIES AND REPRESENTATIONS.
Company warrants and represents that:
(a) It has, and will have throughout the Term of
this Agreement, the right to authorize use of the Trademark to
Manufacturer in accordance with the terms and provisions of
this Agreement; and
(b) The entering of this Agreement by the Company
does not violate any agreements, rights or obligations existing
between the Company and any other person, entity, or
corporation.
17. INDEMNIFICATIONS.
(a) Company hereby indemnifies Manufacturer and
shall hold it harmless from any loss, liability, damage, cost
or expense (including reasonable attorneys fees) arising out of
any claims or suits which may be brought against Manufacturer
by reason of the breach by the Company of the warranties or
representations as set forth in Article 16, provided that
Manufacturer gives prompt written notice, and full cooperation
and assistance to the Company relative to any such claim or
suit, and that the Company shall have the option to undertake
and conduct the defense of any suit so brought. The
Manufacturer shall cooperate fully in all respects with the
Company in the conduct and defense of said suit and/or
proceedings.
(b) Manufacturer indemnifies and agrees to hold the
Company harmless from any loss, liability, damage, cost or
expense (including reasonable attorneys fees), arising out of
(i) any claims or suits by reason of any unauthorized use by
Manufacturer in connection with the Products or the Trademarks
covered by this Agreement; (ii) Manufacturer's non-compliance
with any applicable federal, state, or local law or with any
other applicable governmental regulations; and (iii) any
alleged defects and or inherent dangers in Products or use
thereof.
18. TERMINATION.
(a) Company shall have the right to terminate this
Agreement, if Manufacturer breaches any of its obligations
under this Agreement or such other occurrences as outlined
below.
(i) If any governmental agency or other body or
office or official vested with
EXHIBIT D<PAGE>
appropriate authority finds that the Products are
harmful or defective in any way, manner or form,
or are being sold or distributed in contravention of
applicable laws and regulations or in a manner likely
to cause harm; or
(ii) If Manufacturer manufactures the Products
without the prior written approval of the Company as
provided herein or in direct contradiction to the
Purchase Order; or
(iii) If Manufacturer is unable to pay its debts
when due, or makes any assignment for the benefit of
creditors, or files any petition under the bankruptcy
or insolvency laws of any jurisdiction, country or
place, or has or suffers a receiver or trustee to be
appointed for its business or property, or is
adjudicated a bankrupt or an insolvent; or
(iv) If Manufacturer fails to make timely delivery
of the Products.
(b) In the event any of these defaults occur, the
Company shall give notice of termination in writing to
Manufacturer by certified mail. The Manufacturer shall have
ten (10) days from the date of giving notice in which to
correct any of these defaults or at the Owner's sole
discretion, Manufacturer may be given additional time to
correct such defaults and failing such, this Agreement shall
thereupon immediately terminate.
19. ACTS UPON EXPIRATION OR TERMINATION AT THIS
AGREEMENT.
(a) Upon and after the expiration or termination of
this Agreement, Manufacturer agrees not to make reference in
its advertising or its business materials as having been
formerly associated with the Company or the Trademarks.
(b) Upon and after the expiration or termination of
this Agreement, all rights granted to Manufacturer hereunder
shall forthwith revert to the Company, who shall be free to
transfer any and all rights to others to use the Trademarks in
connection with the manufacture of the Products.
(c) Upon and after the expiration or termination of
this Agreement, Manufacturer and its Affiliates will refrain
from further use of the Trademarks or any further reference to
it, directly or indirectly, or of anything confusingly similar
thereto, in connection with the manufacture or sale of any
products. Additionally, all sketches, patterns, prototypes,
samples or other materials relating to the Products shall be
returned by Manufacturer to the Company.
(d) In the event of expiration or termination of
this Agreement, as herein provided, with the exception of the
Products which Manufacturer must ship to satisfy any unfilled,
confirmed orders for the current season it had received prior
to said expiration or termination, the Company shall have the
prior right and option to purchase any or all of the Products
and Packaging Materials, as then in Manufacturer's possession
or carried on its books of account. Upon such termination or
EXHIBIT D<PAGE>
expiration Manufacturer shall immediately cause physical
inventories to be taken of (i) Products on hand; (ii) Products
in the process of manufacture; and (iii) all Packaging
Materials, which inventories shall be reduced to writing and a
copy thereof shall be delivered to Company not later than
fifteen (15) days from such termination or expiration. Written
notice of the taking of each inventory shall be given the
Company at least forty-eight (48) hours prior thereto. The
Company shall have the right to be present at such physical
inventory or to take its own inventory, and to exercise all
rights it has available with respect to the examination of
Manufacturer's books and records. If Manufacturer does not
allow the Company to take such inventory it shall have no right
to sell the remaining Products as provided in Article 19(f)
below.
(e) Manufacturer recognizes that any sale of the
Products upon termination or expiration, would cause
irreparable damage to the prestige of the Company and to the
Trademark, and to the goodwill pertaining thereto.
(f) Upon expiration or termination of this
Agreement, Manufacturer shall cease the manufacture of
Products. All the Products set forth on the inventories
referred to in subdivision (i) and (ii) of Article 19(f) which
are not purchased by the Company pursuant to such Article may
be sold subject to the Company's prior right to approve the
customers and the terms and conditions of each sale. Such sale
shall otherwise be strictly in accordance with the terms,
covenants and conditions of this Agreement as though the
Agreement had not expired or terminated.
20. NOTICES. All notices which either party hereto
is required or may desire to give shall be given by addressing
the same to the address hereinafter in this Article, or at such
other address as may be designated in writing by any party in a
notice to the other given in the manner prescribed in this
Article. All such notices shall be sufficiently given when
mailed by registered or certified mail. The address to which
any such notices, shall be given are the following:
TO COMPANY: TO MANUFACTURER:
ATTENTION: ATTENTION:
21. NO PARTNERSHIP, ETC. This Agreement does not
constitute and shall not be construed to create a partnership
or joint venture between the Company and Manufacturer. Neither
party shall have any right to obligate or bind the other party
in any manner whatsoever, and nothing herein contained shall
give, or is intended to give, any rights of any kind to any
third persons.
22. NON-ASSIGNABILITY, ETC. This Agreement shall
bind and inure to the benefit of the Company and its successors
and assigns. This Agreement is personal to Manufacturer, and
Manufacturer shall not franchise its rights hereunder and
neither this Agreement nor any of the rights
EXHIBIT D<PAGE>
of Manufacturer hereunder shall be sold, transferred or
assigned by Manufacturer and no rights hereunder shall devolve
by operation of law or otherwise upon any receiver, liquidator,
trustee or other party.
23. SEVERABILITY. If any provision or any portion
of any provision of this Agreement shall be construed to be
illegal, invalid, or unenforceable, such shall be deemed
stricken and deleted from this Agreement to the same extent and
effect as if never incorporated herein, but all other
provisions of this Agreement and remaining portion of any
provision which is not found to be illegal, invalid or
unenforceable in part shall continue in full force and effect.
24. HEADINGS. The headings of the Articles of this
Agreement are for convenience only and shall in no way limit or
affect the term or conditions of this Agreement.
25. COUNTERPARTS. This Agreement may be executed in
two (2) or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and
the same instrument.
26. CONSTRUCTION. This Agreement shall be construed
in accordance with the laws of the State of New York of the
United States of America.
27. WAIVER, MODIFICATION, ETC. No waiver,
modification or cancellation of any term or condition of this
Agreement shall be effective unless executed in writing by the
party charged therewith. No written waiver shall excuse the
performance of any acts other than those specifically referred
to herein. The fact that the Company has not previously
insisted upon Manufacturer expressly complying with any
provision of this Agreement shall not be deemed to be a waiver
of the Company's future right to require compliance in respect
thereof and Manufacturer specifically acknowledges and agrees
that the prior forbearance in respect of any act, term or
condition shall not prevent the Company from subsequently
requiring full and complete compliance thereafter.
Continued...
EXHIBIT D<PAGE>
28. JURISDICTION. In the event that a court action
becomes necessary the Company and Manufacturer consent to the
jurisdiction of the courts of the State of New York, including
all New York Courts and all Federal Courts of the State of New
York.
IN WITNESS WHEREOF, the parties hereto have signed
this Agreement as of the date first written above.
COMPANY: MANUFACTURER:
By: By:
Name: Name:
Title: Title:
EXHIBIT D<PAGE>
TOMMY HILFIGER LICENSING, INC. PAGE______ OF ______
DATE________________
FORM MUST BE SUBMITTED COMPLETED SUBMIT TO THE ATTENTION OF:
TOMMY HILFIGER LICENSING, INC.
913 N. MARKET STREET
WILMINGTON, DELAWARE 19801
NAME OF LICENSEE_________________________________________________________
LICENSED
PRODUCT__________________________________________________________________
LICENSEE'S
ADDRESS__________________________________________________________________
EXPENDITURES REFLECT THE PERIOD _____ / _____ / _____ TO _____ /_____ /
_____, ALL TEARSHEETS AND ADVERTISING BILLS MUST ACCOMPANY THIS FORM.
DATE OF PUBLICATION OF DOLLAR AMOUNT
ADVERTISING TYPE OF ADVERTISING LICENSEE SPENT
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
EXHIBIT E<PAGE>
TERRITORY
Albania
Andorra
Austria
Bahrain
Belgium
Bulgaria
Cyprus
Czech Republic
Denmark
Egypt
Finland
France
Germany
Greece
Holland
Hungary
Iceland
Iran
Iraq
Ireland
Israel
Italy
Jordan
Kuwait
Lebanon
Lichtenstein
Luxembourg
Malta
Norway
Oman
Poland
Portugal
Qatar
Romania
Saudi Arabia
Solvenia
Spain
Sweden
Switzerland
Syria
Turkey
United Arab Emirates
United Kingdom (England, Northern Ireland, Scotland, Wales)
Yemen
EXHIBIT F<PAGE>
CERTIFICATION
In consideration of Tommy Hilfiger Licensing, Inc.
("THLI") entering into a licensing arrangement with Pepe Jeans
London Corporation for the manufacture, distribution and sale
of Tommy Hilfiger (Registered) brand merchandise and in
compliance with THLI's License Agreement with us (the
"Agreement"), we hereby certify that:
Any merchandise (including components thereof)
manufactured under the Agreement will be manufactured in
compliance with the wage and hour laws of the country of
manufacture and without the use of child (under the age of 14),
prison or slave labor; we will obtain the signature of an
authorized representative of all suppliers and contract sewing
shops or other designated contract facilities manufacturing
Tommy Hilfiger (Registered) brand merchandise on Certification
similar to this document, and return same to THLI no later than
thirty (30) days after execution; and we have in effect a
program of monitoring any our manufacturing facilities, and the
manufacturing facilities or our suppliers, contract sewing
shops and other designated contract facilities which
manufacture Tommy Hilfiger (Registered) brand merchandise for
compliance with the requirements set forth above.
Any merchandise shipped to THLI or otherwise imported
into the Territory as defined in the Agreement will be in
compliance with all laws applicable to the designation of
country of origin on products, accurately states the country of
origin on all products; the marking of shipments with proper
country of origin and shall be shipped under legally issued and
valid export licenses or visas.
[Name of your Company]
Date: By:
Authorized Signature
[Notary Public Seal]1
EXHIBIT G
EXHIBIT 11
TOMMY HILFIGER CORPORATION
COMPUTATION OF NET INCOME PER ORDINARY SHARES
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended
March 31, March 31, March 31,
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
FINANCIAL STATEMENT PRESENTATION
PRIMARY
Average shares outstanding................................ 37,059 35,767 34,963
Net effect of dilutive stock options on the treasury
stock method using average market price................... 826 1,474 1,383
------- ------- -------
Total..................................................... 37,885 37,241 36,346
======= ======= =======
Net Income................................................ $86,382 $61,500 $40,715
======= ======= =======
Per Share Amount.......................................... $ 2.28 $ 1.65 $ 1.12
======= ======= =======
FULLY DILUTED
Average shares outstanding................................ 37,059 35,767 34,963
Net effect of dilutive stock options based on the
treasury stock method using ending market price........... 979 1,606 1,666
------- ------- -------
Total..................................................... 38,038 37,373 36,629
======= ======= =======
Net Income................................................ $86,382 $61,500 $40,715
======= ======= =======
Per Share Amount......................................... $ 2.27 $ 1.65 $ 1.11
======= ======= =======
</TABLE>
EXHIBIT 21
SUBSIDIARIES OF
TOMMY HILFIGER CORPORATION
State or Other Jurisdiction
Name of Subsidiary of Incorporation or Organization
Tommy Hilfiger U.S.A., Inc. Delaware
Tommy Hilfiger Retail, Inc. Delaware
Tommy Hilfiger Licensing, Inc. Delaware
Tommy Hilfiger Flagship Stores, Inc. Delaware
TH Flagship Holding Corporation I Delaware
TH Flagship Holding Corporation II Delaware
Tommy Hilfiger Retail (UK) Company United Kingdom
Tommy Hilfiger (Eastern Hemisphere) Limited British Virgin Islands
Tommy Hilfiger (HK) Limited Hong Kong
Tommy Hilfiger (India) Limited British Virgin Islands
Tommy Hilfiger (Singapore) Pte. Ltd. Singapore
EXHIBIT 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the
Registration Statements on Form S-8 (Nos. 33-52810, 33-77168,
33-89298, 33-80439, and 333-20993) of Tommy Hilfiger
Corporation of our report dated May 21, 1997 appearing under
Item 8 in this Annual Report on Form 10-K.
/s/ PRICE WATERHOUSE LLP
PRICE WATERHOUSE LLP
New York, New York
June 20, 1997
EXHIBIT 24
POWER OF ATTORNEY
WHEREAS, Tommy Hilfiger Corporation proposes to file with
Securities and Exchange Commission, under the Securities and
Exchange Act of 1934, as amended, an Annual Report on Form 10-K
for the fiscal year ended March 31, 1997:
NOW, THEREFORE, I hereby appoint Joel J. Horowitz my true
and lawful attorney with power to act and with full power of
substitution and resubstitution, to execute in my name, place,
and stead, in any and all capacities, said Annual Report on Form
10-K and all instruments necessary or incidental in connection
therewith, and to file the same with the Securities and Exchange
Commission, all as fully to all intents and purposes as I might
or could do in person, and I hereby ratify and approve the acts
of said attorney.
IN WITNESS WHEREOF, I have executed this instrument this
15th day of April, 1997.
/s/ Benjamin M.T. Ng
Benjamin M.T. Ng<PAGE>
POWER OF ATTORNEY
WHEREAS, Tommy Hilfiger Corporation proposes to file with
Securities and Exchange Commission, under the Securities and
Exchange Act of 1934, as amended, an Annual Report on Form 10-K
for the fiscal year ended March 31, 1997:
NOW, THEREFORE, I hereby appoint Benjamin M.T. Ng my true
and lawful attorney with power to act and with full power of
substitution and resubstitution, to execute in my name, place,
and stead, in any and all capacities, said Annual Report on Form
10-K and all instruments necessary or incidental in connection
therewith, and to file the same with the Securities and Exchange
Commission, all as fully to all intents and purposes as I might
or could do in person, and I hereby ratify and approve the acts
of said attorney.
IN WITNESS WHEREOF, I have executed this instrument this
15th day of April, 1997.
/s/ Joel J. Horowitz
Joel J. Horowitz <PAGE>
POWER OF ATTORNEY
WHEREAS, Tommy Hilfiger Corporation proposes to file with
Securities and Exchange Commission, under the Securities and
Exchange Act of 1934, as amended, an Annual Report on Form 10-K
for the fiscal year ended March 31, 1997:
NOW, THEREFORE, I hereby appoint Joel J. Horowitz and
Benjamin M.T. Ng, each of them severally, my true and lawful
attorney or attorneys with power to act with or without the other
and with full power of substitution and resubstitution, to
execute in my name, place, and stead, in any and all capacities,
said Annual Report on Form 10-K and all instruments necessary or
incidental in connection therewith, and to file the same with the
Securities and Exchange Commission, all as fully to all intents
and purposes as I might or could do in person, and I hereby
ratify and approve the acts of said attorney.
IN WITNESS WHEREOF, I have executed this instrument this
18th day of April, 1997.
/s/ Silas K.F. Chou
Silas K.F. Chou<PAGE>
POWER OF ATTORNEY
WHEREAS, Tommy Hilfiger Corporation proposes to file with
Securities and Exchange Commission, under the Securities and
Exchange Act of 1934, as amended, an Annual Report on Form 10-K
for the fiscal year ended March 31, 1997:
NOW, THEREFORE, I hereby appoint Joel J. Horowitz and
Benjamin M.T. Ng, each of them severally, my true and lawful
attorney or attorneys with power to act with or without the other
and with full power of substitution and resubstitution, to
execute in my name, place, and stead, in any and all capacities,
said Annual Report on Form 10-K and all instruments necessary or
incidental in connection therewith, and to file the same with the
Securities and Exchange Commission, all as fully to all intents
and purposes as I might or could do in person, and I hereby
ratify and approve the acts of said attorney.
IN WITNESS WHEREOF, I have executed this instrument this
15th day of April, 1997.
/s/ Thomas J. Hilfiger
Thomas J. Hilfiger<PAGE>
POWER OF ATTORNEY
WHEREAS, Tommy Hilfiger Corporation proposes to file with
Securities and Exchange Commission, under the Securities and
Exchange Act of 1934, as amended, an Annual Report on Form 10-K
for the fiscal year ended March 31, 1997:
NOW, THEREFORE, I hereby appoint Joel J. Horowitz and
Benjamin M.T. Ng, each of them severally, my true and lawful
attorney or attorneys with power to act with or without the other
and with full power of substitution and resubstitution, to
execute in my name, place, and stead, in any and all capacities,
said Annual Report on Form 10-K and all instruments necessary or
incidental in connection therewith, and to file the same with the
Securities and Exchange Commission, all as fully to all intents
and purposes as I might or could do in person, and I hereby
ratify and approve the acts of said attorney.
IN WITNESS WHEREOF, I have executed this instrument this
15th day of April, 1997.
/s/ Lawrence S. Stroll
Lawrence S. Stroll<PAGE>
POWER OF ATTORNEY
WHEREAS, Tommy Hilfiger Corporation proposes to file with
Securities and Exchange Commission, under the Securities and
Exchange Act of 1934, as amended, an Annual Report on Form 10-K
for the fiscal year ended March 31, 1997:
NOW, THEREFORE, I hereby appoint Joel J. Horowitz and
Benjamin M.T. Ng, each of them severally, my true and lawful
attorney or attorneys with power to act with or without the other
and with full power of substitution and resubstitution, to
execute in my name, place, and stead, in any and all capacities,
said Annual Report on Form 10-K and all instruments necessary or
incidental in connection therewith, and to file the same with the
Securities and Exchange Commission, all as fully to all intents
and purposes as I might or could do in person, and I hereby
ratify and approve the acts of said attorney.
IN WITNESS WHEREOF, I have executed this instrument this 2nd
day of April, 1997.
/s/ Joseph M. Adamko
Joseph M. Adamko<PAGE>
POWER OF ATTORNEY
WHEREAS, Tommy Hilfiger Corporation proposes to file with
Securities and Exchange Commission, under the Securities and
Exchange Act of 1934, as amended, an Annual Report on Form 10-K
for the fiscal year ended March 31, 1997:
NOW, THEREFORE, I hereby appoint Joel J. Horowitz and
Benjamin M.T. Ng, each of them severally, my true and lawful
attorney or attorneys with power to act with or without the other
and with full power of substitution and resubstitution, to
execute in my name, place, and stead, in any and all capacities,
said Annual Report on Form 10-K and all instruments necessary or
incidental in connection therewith, and to file the same with the
Securities and Exchange Commission, all as fully to all intents
and purposes as I might or could do in person, and I hereby
ratify and approve the acts of said attorney.
IN WITNESS WHEREOF, I have executed this instrument this
22nd day of April, 1997.
/s/ Clinton V. Silver
Clinton V. Silver<PAGE>
POWER OF ATTORNEY
WHEREAS, Tommy Hilfiger Corporation proposes to file with
Securities and Exchange Commission, under the Securities and
Exchange Act of 1934, as amended, an Annual Report on Form 10-K
for the fiscal year ended March 31, 1997:
NOW, THEREFORE, I hereby appoint Joel J. Horowitz and
Benjamin M.T. Ng, each of them severally, my true and lawful
attorney or attorneys with power to act with or without the other
and with full power of substitution and resubstitution, to
execute in my name, place, and stead, in any and all capacities,
said Annual Report on Form 10-K and all instruments necessary or
incidental in connection therewith, and to file the same with the
Securities and Exchange Commission, all as fully to all intents
and purposes as I might or could do in person, and I hereby
ratify and approve the acts of said attorney.
IN WITNESS WHEREOF, I have executed this instrument this
18th day of April, 1997.
/s/ Ronald K.Y. Chao
Ronald K.Y. Chao<PAGE>
POWER OF ATTORNEY
WHEREAS, Tommy Hilfiger Corporation proposes to file with
Securities and Exchange Commission, under the Securities and
Exchange Act of 1934, as amended, an Annual Report on Form 10-K
for the fiscal year ended March 31, 1997:
NOW, THEREFORE, I hereby appoint Joel J. Horowitz and
Benjamin M.T. Ng, each of them severally, my true and lawful
attorney or attorneys with power to act with or without the other
and with full power of substitution and resubstitution, to
execute in my name, place, and stead, in any and all capacities,
said Annual Report on Form 10-K and all instruments necessary or
incidental in connection therewith, and to file the same with the
Securities and Exchange Commission, all as fully to all intents
and purposes as I might or could do in person, and I hereby
ratify and approve the acts of said attorney.
IN WITNESS WHEREOF, I have executed this instrument this
18th day of April, 1997.
/s/ Lester M.Y. Ma
Lester M.Y. Ma<PAGE>
POWER OF ATTORNEY
WHEREAS, Tommy Hilfiger Corporation proposes to file with
Securities and Exchange Commission, under the Securities and
Exchange Act of 1934, as amended, an Annual Report on Form 10-K
for the fiscal year ended March 31, 1997:
NOW, THEREFORE, I hereby appoint Joel J. Horowitz and
Benjamin M.T. Ng, each of them severally, my true and lawful
attorney or attorneys with power to act with or without the other
and with full power of substitution and resubstitution, to
execute in my name, place, and stead, in any and all capacities,
said Annual Report on Form 10-K and all instruments necessary or
incidental in connection therewith, and to file the same with the
Securities and Exchange Commission, all as fully to all intents
and purposes as I might or could do in person, and I hereby
ratify and approve the acts of said attorney.
IN WITNESS WHEREOF, I have executed this instrument this
10th day of April, 1997.
/s/ Steven A. Sorrillo
Steven A. Sorrillo
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the Tommy
Hilfiger Corporation Consolidated Balance Sheet as of March 31, 1997 and
Consolidated Statement of Operations for the year then ended and is qualified in
its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 109,908
<SECURITIES> 0
<RECEIVABLES> 79,984
<ALLOWANCES> 0
<INVENTORY> 123,847
<CURRENT-ASSETS> 332,353
<PP&E> 121,540
<DEPRECIATION> 0
<TOTAL-ASSETS> 463,085
<CURRENT-LIABILITIES> 61,686
<BONDS> 1,510
0
0
<COMMON> 372
<OTHER-SE> 397,092
<TOTAL-LIABILITY-AND-EQUITY> 463,085
<SALES> 0
<TOTAL-REVENUES> 661,688
<CGS> 0
<TOTAL-COSTS> 344,884
<OTHER-EXPENSES> 185,556
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 131,248
<INCOME-TAX> 44,866
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 86,382
<EPS-PRIMARY> 2.28
<EPS-DILUTED> 0
</TABLE>
